EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
Among
ONEIDA LTD.,
DELCO INTERNATIONAL LTD. (INC.),
PERRY DELMAN,
ROBERT DELMAN,
PETER KRANES,
MICHAEL SEHLMEYER
and
DENNIS KANFER
Dated as of May 30, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms 1
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares 11
SECTION 2.02. Purchase Price; Allocation of Purchase Price 11
SECTION 2.03. Closing 11
SECTION 2.04. Closing Deliveries by the Stockholders 11
SECTION 2.05. Closing Deliveries by the Purchaser 11
SECTION 2.06. Post-Closing Adjustment of Purchase Price 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
SECTION 3.01. Authority of the Company and Each Stockholder 15
SECTION 3.02. Organization, Authority and Qualification of the
Company 15
SECTION 3.03. Capital Stock and Ownership of the Company 16
SECTION 3.04. Subsidiaries 16
SECTION 3.05. Corporate Books and Records 18
SECTION 3.06. No Conflict 18
SECTION 3.07. Governmental Consents and Approvals 18
SECTION 3.08. Financial Information; Books and Records 18
SECTION 3.09. Absence of Undisclosed Liabilities 19
SECTION 3.10. Receivables 19
SECTION 3.11. Inventories 20
SECTION 3.12. Acquired Assets 20
SECTION 3.13. Sales and Purchase Order Backlog 20
SECTION 3.14. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions 21
SECTION 3.15. Litigation 23
SECTION 3.16. Compliance with Laws 23
SECTION 3.17. Environmental and Other Permits and Licenses;
Related Matters 24
SECTION 3.18. Material Contracts 24
SECTION 3.19. Intellectual Property 26
SECTION 3.20. Real Property 28
SECTION 3.21. Tangible Personal Property 29
SECTION 3.22. Assets 29
SECTION 3.23. Customers 30
SECTION 3.24. Suppliers 30
SECTION 3.25. Employee Benefit Matters 31
SECTION 3.26. Labor Matters 33
SECTION 3.27. Salaried Employees 34
SECTION 3.28. Certain Interests 34
SECTION 3.29. Taxes 35
SECTION 3.30. Insurance 36
SECTION 3.31. Accounts; Lockboxes; Safe Deposit Boxes; Powers
of Attorney 37
SECTION 3.32. Full Disclosure 38
SECTION 3.33. Brokers 38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01. Organization and Authority of the Purchaser 38
SECTION 4.02. No Conflict 38
SECTION 4.03. Governmental Consents and Approvals 39
SECTION 4.04. Investment Purpose 39
SECTION 4.05. Litigation 39
SECTION 4.06. Brokers 39
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing 39
SECTION 5.02. Access to Information 40
SECTION 5.03. Confidentiality 41
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents 43
SECTION 5.05. Notice of Developments 43
SECTION 5.06. Use of Intellectual Property 44
SECTION 5.07. Non-Competition 44
SECTION 5.08. Release of Indemnity Obligations 46
SECTION 5.09. Transfer of SDC 46
SECTION 5.10. Guarantee 46
SECTION 5.11. Further Action 46
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Phantom Shares 47
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity 47
SECTION 7.02. Returns and Payments 48
SECTION 7.03. Contests 48
SECTION 7.04. Time of Payment 49
SECTION 7.05. Cooperation and Exchange of Information 50
SECTION 7.06. Conveyance Taxes 50
SECTION 7.07. Miscellaneous 51
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Company and the
Stockholders 51
SECTION 8.02. Conditions to Obligations of the Purchaser 52
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties 55
SECTION 9.02. Indemnification by the Stockholders 55
SECTION 9.03. Distributions from Indemnity Escrow Fund 57
SECTION 9.04. Tax Matters 57
SECTION 9.05. Appointment of Stockholder Representative 57
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination 60
SECTION 10.02. Effect of Termination 61
SECTION 10.03. Waiver 61
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses 61
SECTION 11.02. Notices 61
SECTION 11.03. Public Announcements 62
SECTION 11.04. Headings 62
SECTION 11.05. Severability 62
SECTION 11.06. Entire Agreement 63
SECTION 11.07. Assignment 63
SECTION 11.08. No Third Party Beneficiaries 63
SECTION 11.09. Amendment 63
SECTION 11.10. Governing Law 63
SECTION 11.11. Counterparts 63
SECTION 11.12. Specific Performance 63
EXHIBITS
5.07 Non-Compete Purchase Price Schedule
11.03 Final Form of Press Release
STOCK PURCHASE AGREEMENT, dated as of May 30, 2000, among Oneida Ltd., a New
York corporation (the "Purchaser"), Delco International Ltd. (Inc.), a New York
corporation (the "Company"), and Perry Delman, Robert Delman, Peter Kranes,
Michael Sehlmeyer and Dennis Kanfer (each a "Stockholder" and, collectively, the
"Stockholders").
W I T N E S S E T H:
WHEREAS, the Company, directly and through its various subsidiaries, is
engaged in the business of sourcing, importing, manufacturing and distributing
cutlery, silverplated and stainless flatware and hollowware, china dinnerware,
glass tableware and other miscellaneous supplies at various locations
in the United States and Canada (the "Business");
WHEREAS, the Stockholders own all the issued and outstanding shares (the
"Shares") of common stock, par value $0.01 per share (the "Common Stock"), of
the Company;
WHEREAS, the Stockholders wish to sell to the Purchaser, and the Purchaser
wishes to purchase from the Stockholders, the Shares, upon the terms and subject
to the conditions set forth herein;
WHEREAS, contemporaneously with the execution of this Agreement, the Company
and the Stockholders are entering into an escrow agreement (the "Escrow
Agreement") with The Chase Manhattan Bank (the "Escrow Agent"), which will
become effective upon the closing of the transactions contemplated by this
Agreement; and
WHEREAS, contemporaneously with the execution of this Agreement, certain
Stockholders are entering into employment agreements with the Company (each an
"Employment Agreement" and, collectively, the "Employment Agreements"), which
will become effective upon the closing of the transactions contemplated by
this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser, the Company and the
Stockholders hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used herein, the following terms
shall have the following meanings:
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Adjustment Escrow Amount" means $5,000,000.
"Adjustment Escrow Fund" means the Adjustment Escrow Amount deposited
with the Escrow Agent as such sum may be increased or decreased as provided in
the Escrow Agreement.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Stock Purchase Agreement,
dated as of May 30, 2000, among the Purchaser, the Company and the Stockholders
(including the exhibits hereto and the Disclosure Schedule) and all amendments
hereto made in accordance with the provisions of Section 11.09.
"Ancillary Agreements" means the Escrow Agreement and the Employment
Agreements.
"Ancillary Lease Documents" has the meaning specified in Section
3.20(d).
"Assets" means the total assets of the Company shown on any specified
balance sheet of the Company.
"Book Value" means the excess of the Assets over the Liabilities of the
Company.
"Business" has the meaning specified in the Recitals.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by Law to be closed in The City of
New York.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended through the Closing Date.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System, as updated through the Closing Date.
"Closing" has the meaning specified in Section 2.03.
"Closing Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of the Company and the
Subsidiaries, to be prepared pursuant to Section 2.06(a) and to be dated as of
the Closing Date.
"Closing Date" has the meaning specified in Section 2.03.
"Code" means the Internal Revenue Code of 1986, as amended through the
date hereof.
"Common Stock" has the meaning specified in the Recitals.
"Company" has the meaning specified in the Preamble.
"Company Marks" has the meaning specified in Section 5.06(a).
"Company Software" means all Software manufactured, distributed, sold,
licensed, owned, used or marketed by the Company.
"Company Systems" means all computer hardware, Software, systems, and
equipment (including embedded microcontrollers in non-computer equipment)
embedded within or used to operate the products of the Business, and/or used for
the operation of the Business as currently conducted.
"Confidential Information" has the meaning specified in Section
5.03(a).
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee, personal
representative or executor, of the power to direct or cause the direction of the
affairs or management of a Person, whether through the ownership of voting
securities, as trustee, personal representative or executor, by contract or
credit arrangement or otherwise.
"Copyrights" means rights of publicity and privacy, and copyrights in
works of authorship of any type, including Software, registrations and
applications for registration thereof throughout the world, all rights therein
provided by international treaties and conventions, all moral and common law
rights thereto, and all other rights associated therewith.
"Designated Amount" means $50,000.
"Disclosure Schedule" means the Disclosure Schedule attached hereto,
dated as of the date hereof, and forming a part of this Agreement.
"Employment Agreement(s)" has the meaning specified in the Recitals.
"Encumbrance" means any security interest, pledge, hypothecation,
mortgage, lien (including, without limitation, environmental and tax liens),
violation, charge, lease, license, encumbrance, servient easement, adverse
claim, reversion, reverter, preferential arrangement, restrictive covenant,
condition or restriction of any kind, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership.
"Environment" means surface waters, groundwaters, soil, subsurface
strata and ambient air.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations, proceedings, consent orders or
consent agreements relating in any way to any Environmental Law or any
Environmental Permit (hereinafter "Claims"), including, without limitation, (a)
any and all Claims by Governmental Authorities for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (b) any and all Claims by any Person seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Laws" means any Law, now or hereafter in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, health, safety, natural resources or Hazardous Materials,
including, without limitation, CERCLA; the Resource Conservation and Recovery
Act, 42 U.S.C. 6901 et seq.; the Hazardous Materials Transportation Act, 49
U.S.C. 6901 et seq.; the Clean Water Act, 33 U.S.C. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq.; the Clean Air Act, 42 U.S.C.
7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.300f et seq.; the Atomic
Energy Act, 42 U.S.C. 2011 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. 136 et seq.; the Federal Food, Drug and Cosmetic Act,
21 U.S.C. 301 et seq.; and California Proposition 65.
"Environmental Permits" means all permits, approvals, identification
numbers, licenses and other authorizations required under or issued pursuant to
any applicable Environmental Law.
"ERISA" has the meaning specified in Section 3.25(a).
"Escrow Agent" has the meaning specified in the Recitals.
"Escrow Agreement" has the meaning specified in the Recitals.
"Escrow Amount" means the sum of the Adjustment Escrow Amount and the
Indemnity Escrow Amount.
"Exempt Term" has the meaning specified in Section 5.09.
"Financial Statements" has the meaning specified in Section 3.08(a)(i).
"Governmental Authority" means any United States federal, state or
local or any non-United States government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) petroleum and petroleum products,
radioactive materials, asbestos-containing materials, urea formaldehyde foam
insulation, transformers or other equipment that contains polychlorinated
biphenyls and radon gas, (b) any other chemicals, materials or substances
defined as or included in the definition of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous wastes", "restricted
hazardous wastes", "toxic substances", "toxic pollutants", "contaminants" or
"pollutants", or words of similar import, under any applicable Environmental Law
and (c) any other chemical, material or substance which is regulated by any
Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person, (a) all indebtedness
of such Person, whether or not contingent, for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (including deferred compensation under any employee benefit, bonus,
stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plan, program or arrangement, or any employment,
termination, severance, change in control or other contract or agreement), (c)
all obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person as lessee under
leases that have been or should be, in accordance with U.S. GAAP, recorded as
capital leases, (f) all obligations, contingent or otherwise, of such Person
under acceptance, letter of credit or similar facilities, (g) all obligations of
such Person to purchase, redeem, retire, defease or otherwise acquire for value
any capital stock of such Person or any warrants, rights or options to acquire
such capital stock, valued, in the case of redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation preference plus accrued and
unpaid dividends, (h) all Indebtedness of others referred to in clauses (a)
through (g) above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person through an
agreement (i) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness, (ii) to purchase, sell or
lease (as lessee or lessor) property, or to purchase or sell services, primarily
for the purpose of enabling the debtor to make payment of such Indebtedness or
to assure the holder of such Indebtedness against loss, (iii) to supply funds to
or in any other manner invest in the debtor (including any agreement to pay
for property or services irrespective of whether such property is received or
such services are rendered) or (iv) otherwise to assure a creditor against loss,
and (i) all Indebtedness referred to in clauses (a) through (g) above secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Encumbrance on property (including, without
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness.
"Indemnified Party" has the meaning specified in Section 9.02(a).
"Indemnity Escrow Amount" means $5,000,000.
"Indemnity Escrow Fund" means the Indemnity Escrow Amount deposited
with the Escrow Agent as such sum may be increased or decreased as provided in
the Escrow Agreement and in Section 2.06(c)(i).
"Independent Accounting Firm" has the meaning specified in Section
2.06(b)(ii).
"Intellectual Property" means (i) Patents, (ii) Trademarks, (iii)
Copyrights, (iv) Trade Secrets and (v) Software.
"Interim Financial Statements" has the meaning specified in Section
3.08(a)(ii).
"Internal MIS Systems" means Software and computer systems (including
hardware, firmware, operating system software, utilities and applications
software) used in the ordinary course of the Business that process financial
information, including, where applicable, payroll, accounting,
billing/receivables, purchasing payables, inventory, asset tracking, customer
service and human resources.
"Inventories" means all inventory, merchandise, finished goods, raw
materials, packaging, supplies and other personal property related to the
Business maintained, held or stored by or for the Company or any Subsidiary on
the Closing Date and any prepaid deposits for any of the same.
"IRS" means the Internal Revenue Service of the United States.
"knowledge of the Company" means the knowledge of the executive
officers of the Company, after due inquiry.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, requirement or rule of law (including,
without limitation, common law).
"Leased Real Property" means the real property leased by the Company or
any Subsidiary, in each case as tenant, together with, to the extent leased by
the Company or any Subsidiary, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Company or any Subsidiary
attached or appurtenant thereto, and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement, arrangement,
commitment or undertaking.
"Licensed Intellectual Property" means Intellectual Property licensed
to the Company or any Subsidiary pursuant to the Licenses.
"Licenses" means (i) licenses of Intellectual Property by the Company
or any Subsidiary to third parties, (ii) licenses of Intellectual Property by
third parties to the Company or any Subsidiary and (iii) agreements between the
Company or any Subsidiary and third parties relating to the development or use
of Intellectual Property, the development or transmission of data, or the use,
modification, framing, linking advertisement, or other practices with respect to
Internet web sites.
"Loss" has the meaning specified in Section 9.02(a).
"Material Adverse Effect" means circumstances or changes in or effects
on the Business, the Company or any Subsidiary that, individually or in the
aggregate with all other circumstances or changes in or effects on the Business,
the Company or any Subsidiary: (a) is or is reasonably likely to have a
materially adverse effect on the business, operations, assets or liabilities
(including, without limitation, contingent liabilities), employee relationships,
customer or supplier relationships, results of operations or the condition
(financial or otherwise) of the Business, the Company or any Subsidiary,
taken as a whole; (b) is reasonably likely to have a materially adverse effect
on the ability of the Purchaser to operate or conduct the Business in the manner
in which it is currently operated or conducted by the Company and the
Subsidiaries; or (c) materially impairs the ability of the Company or any
Stockholder to perform its respective obligations under this Agreement.
"Material Contracts" has the meaning specified in Section 3.18(a).
"Multiemployer Plan" has the meaning specified in Section 3.25(b).
"Multiple Employer Plan" has the meaning specified in Section 3.25(b).
"Non-Compete Purchase Price" has the meaning specified in Section
5.07(d).
"Options" has the meaning specified in Section 3.20(d)(v).
"Owned Intellectual Property" means Intellectual Property owned by the
Company or any Subsidiary.
"Owned Real Property" means the real property owned by the Company or
any Subsidiary, together with all buildings and other structures, facilities or
improvements located thereon, all fixtures, systems, equipment and items of
personal property of the Company or any Subsidiary attached or appurtenant
thereto and all easements, licenses, rights and appurtenances relating to the
foregoing.
"Patents" means United States, foreign and international patents,
patent applications and statutory invention registrations, including reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations
thereof, and all rights therein provided by international treaties and
conventions.
"Payments" has the meaning specified in Section 9.05(a)(ii).
"Permits" means all permits, approvals, identification numbers,
licenses and other authorizations required under or issued pursuant to any law.
"Permitted Encumbrances" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and as to which the Company is not otherwise subject to civil or
criminal liability due to its existence: (a) liens for Taxes, assessments and
governmental charges or levies not yet due and payable; (b) Encumbrances imposed
by Law, such as materialmen's, mechanics', carriers', workmen's and repairmen's
liens and other similar liens arising in the ordinary course of business
securing obligations that (i) are not overdue for a period of more than 30
days and (ii) are not in excess of $5,000 in the case of a single property or
$50,000 in the aggregate at any time; (c) pledges or deposits to secure
obligations under workers' compensation laws or similar legislation or to secure
public or statutory obligations; and (d) minor survey exceptions, reciprocal
easement agreements and other customary encumbrances on title to real
property that (i) were not incurred in connection with any Indebtedness, (ii) do
not render title to the property encumbered thereby unmarketable and (iii) do
not, individually or in the aggregate, materially adversely affect the value of
or the use of such property for its current and anticipated purposes.
"Person" means any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.
"Phantom Stock Award" has the meaning specified in Section 6.01.
"Phantom Stock Plan" means the Company's phantom stock plan.
"Plans" has the meaning specified in Section 3.25(a).
"Purchase Price" has the meaning specified in Section 2.02.
"Purchase Price Bank Account" means a bank account in the United States
to be designated by the Stockholder Representative in a written notice to the
Purchaser at least five Business Days before the Closing which, prior to the
Closing, shall have a balance of $0.0.
"Purchaser" has the meaning specified in the Preamble.
"Purchaser's Accountants" means PricewaterhouseCoopers LLP, independent
accountants of the Purchaser.
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Receivables" means any and all accounts receivable, notes and other
amounts receivable from third parties, including, without limitation, customers
and employees, arising from the conduct of the Business before the Closing Date,
whether or not in the ordinary course, together with any unpaid financing
charges accrued thereon.
"Reference Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of the Business including
the Company and the Subsidiaries, dated as at January 31, 2000, a copy of which
is set forth in Section 3.08(a) of the Disclosure Schedule.
"Reference Balance Sheet Date" means January 31, 2000.
"Regulations" means the Treasury Regulations (including Temporary
Regulations) promulgated by the United States Department of Treasury with
respect to the Code or other federal tax statutes.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the like
into or upon any land or water or air or otherwise entering into the
Environment.
"Remedial Action" means all action: (a) to clean up, remove, treat or
handle in any other way Hazardous Materials in the Environment; (b) to prevent
the Release of Hazardous Materials so that they do not migrate, endanger or
threaten to endanger public health or the Environment; or (c) to perform
remedial investigations, feasibility studies, corrective actions, closures and
postremediation or postclosure studies, investigations, operations, maintenance
and monitoring.
"Resignation Notice" has the meaning specified in Section 9.05(c).
"Restricted Period" has the meaning specified in Section 5.07(a).
"Returns" has the meaning specified in Section 7.02(a).
"SDC" means Seneca Distributors Corp., a New York corporation and
wholly owned subsidiary of the Company.
"SDC Lease" means the lease between the Company and 180-182 Bowery
Realty Corporation relating to the property located at 180-182 Bowery, New York,
New York.
"Shares" has the meaning specified in the Recitals.
"Software" means computer software, programs and databases in any form,
including Internet web sites, web content and links, source code, object code,
operating systems and specifications, data, databases, database management code,
utilities, graphical user interfaces, menus, images, icons, forms, methods of
processing, software engines, platforms and data formats, all versions, updates,
corrections, enhancements and modifications thereof, and all related
documentation, developer notes, comments and annotations.
"Stockholder Representative" has the meaning specified in Section
9.05(a).
"Stockholder(s)" has the meaning specified in the Recitals.
"Stockholders' Accountants" means KPMG LLP, independent accountants of
the Stockholders.
"Stockholders' Agreement" means the Stockholders' Agreement among the
Stockholders dated as of August 15, 1996, as amended.
"Subsidiaries" mean Delco Tableware International, Inc., Seneca
Distributors Corp., Table Source, Inc. and Realco Development Corp. and any and
all other corporations, partnerships, joint ventures, associations and other
entities controlled by the Company directly or indirectly through one or
more intermediaries.
"Tangible Personal Property" has the meaning specified in Section 3.21.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts, and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customs' duties,
tariffs, and similar charges.
"Third Party Claims" has the meaning specified in Section 9.02(b).
"Trade Secrets" means trade secrets, know-how and other confidential or
proprietary technical, business and other information, including manufacturing
and production processes and techniques, research and development information,
technology, drawings, specifications, designs, plans, proposals, technical
data, financial, marketing and business data, pricing and cost information,
business and marketing plans, customer and supplier lists and information, and
all rights in any jurisdiction to limit the use or disclosure thereof.
"Trademarks" means trademarks, service marks, trade dress, logos, trade
names, corporate names, URL addresses, domain names and symbols, slogans and
other indicia of source or origin, including the goodwill of the business
symbolized thereby or associated therewith, common law rights thereto,
registrations and applications for registration thereof throughout the world,
all rights therein provided by international treaties and conventions, and all
other rights associated therewith.
"U.S. GAAP" means United States generally accepted accounting
principles and practices in effect from time to time applied consistently
throughout the periods involved.
"Year 2000 Compliant" means that the Company Systems provide
uninterrupted millennium functionality in that the Company Systems will record,
store, process and present calendar dates falling on or after January 1, 2000 in
the same manner and with the same functionality as the Company Systems record,
store, process and present calendar dates falling on or before December 31,
1999.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and subject
to the conditions of this Agreement, at the Closing, the Stockholders shall
sell, assign, transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the Purchaser, the Shares, and the
Purchaser shall purchase the Shares.
SECTION 2.02. Purchase Price; Allocation of Purchase Price. Subject to the
adjustments set forth in Section 2.06, the purchase price for the Shares shall
be $67,000,000 (the "Purchase Price").
SECTION 2.03. Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Shares contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York at 10:00 A.M.
New York time on the fifth Business Day following the later to occur of (i) the
expiration or termination of all applicable waiting periods under the HSR Act
and (ii) the satisfaction or waiver of all other conditions to the obligations
of the parties set forth in Article VIII, or at such other place or at such
other time or on such other date as the Company and the Purchaser may mutually
agree upon in writing (the day on which the Closing takes place being
the "Closing Date").
SECTION 2.04. Closing Deliveries by the Stockholders. At the Closing, each
Stockholder shall deliver or cause to be delivered to the Purchaser:
(a) stock certificates evidencing such Stockholder's Shares duly
endorsed in blank, or accompanied by stock powers duly executed in blank, in a
form satisfactory to the Purchaser and with all required stock transfer tax
stamps affixed;
(b) a receipt for the Purchase Price less the Escrow Amount executed
by the Stockholder Representative;
(c) a receipt executed by such Stockholder for such Stockholder's
first installment of the Non-Compete Purchase Price set forth in Exhibit 5.07;
and
(d) the opinions, certificates and other documents required to be
delivered pursuant to Section 8.02.
SECTION 2.05. Closing Deliveries by the Purchaser. (a) At the Closing, the
Purchaser shall deliver to the Stockholders:
(i) the Purchase Price less the Escrow Amount by wire transfer in
immediately available funds to the Purchase Price Bank Account;
(ii) the aggregate first installment of the Non-Compete Purchase
Price set forth in Exhibit 5.07 by wire transfer in immediately available funds
to the Purchase Price Bank Account; and
(iii)the opinions, certificates and other documents required to be
delivered pursuant to Section 8.01.
(b) At the Closing, the Purchaser shall deliver to the Escrow Agent,
in accordance with the Escrow Agreement, the Adjustment Escrow Amount and the
Indemnity Escrow Amount by wire transfer in immediately available funds to the
accounts designated therefor in the Escrow Agreement.
SECTION 2.06. Post-Closing Adjustment of Purchase Price. The Purchase
Price shall be subject to adjustment after the Closing as specified in this
Section 2.06:
(a) Closing Balance Sheet. As promptly as practicable, but in any
event within 60 calendar days following the Closing Date, the Purchaser shall
deliver to the Stockholder Representative the Closing Balance Sheet, together
with the report thereon of the Purchaser's Accountants, stating that the Closing
Balance Sheet fairly presents the consolidated financial position of the Company
and the Subsidiaries at the Closing Date in conformity with U.S. GAAP applied on
a basis consistent with the preparation of the Reference Balance Sheet. The
Stockholders shall cooperate and use reasonable efforts to assist the Purchaser
to the extent reasonably required to prepare the Closing Balance Sheet.
(b) Disputes. (i) Subject to clause (ii) of this Section 2.06(b),
the Closing Balance Sheet delivered by the Purchaser to the Stockholder
Representative shall be deemed to be and shall be final, binding and conclusive
on the parties hereto.
(ii) The Stockholders, through the Stockholder Representative, may
dispute any amounts reflected on the Closing Balance Sheet to the extent the net
effect of such disputed amounts in the aggregate would affect the Book Value
reflected on the Closing Balance Sheet by more than the Designated Amount, but
only on the basis that the amounts reflected on the Closing Balance Sheet were
not arrived at in accordance with U.S. GAAP applied on a basis consistent with
the preparation of the Reference Balance Sheet; provided, however, that the
Stockholder Representative, on behalf of the Stockholders, shall have notified
the Purchaser and the Purchaser's Accountants in writing of each disputed item,
specifying the estimated amount thereof in dispute and setting forth, in
reasonable detail, the basis for such dispute, within 30 Business Days of the
Purchaser's delivery of the Closing Balance Sheet to the Stockholder
Representative. In the event of such a dispute, the Stockholders' Accountants
and the Purchaser's Accountants shall attempt to reconcile their differences,
and any resolution by them as to any disputed amounts shall be final, binding
and conclusive on the parties hereto. If any such resolution by the
Stockholders' Accountants and the Purchaser's Accountants leaves in dispute
amounts the net effect of which in the aggregate would not affect the Book Value
reflected on the Closing Balance Sheet by more than the Designated Amount, all
such amounts remaining in dispute shall then be deemed to have been resolved in
favor of the Closing Balance Sheet delivered by the Purchaser to the Stockholder
Representative. If the Stockholders' Accountants and the Purchaser's
Accountants are unable to reach a resolution with such effect within 20 Business
Days after the receipt by the Purchaser and the Purchaser's Accountants of the
Stockholder Representative's written notice of dispute, the Stockholders'
Accountants and the Purchaser's Accountants shall submit the items remaining in
dispute for resolution to Ernst & Young (or, if such firm shall decline or is
unable to act or is not, at the time of such submission, independent of the
Stockholders and the Purchaser, to another independent accounting firm of
international reputation mutually acceptable to the Stockholders and the
Purchaser) (either Ernst & Young or such accounting firm being referred to
herein as the "Independent Accounting Firm"), which shall, within 30 Business
Days after such submission, determine and report to the Stockholders and the
Purchaser upon such remaining disputed items, and such report shall be final,
binding and conclusive on the Stockholders and the Purchaser. The fees and
disbursement of the Independent Accounting Firm shall be allocated among the
Stockholders, on the one hand, and the Purchaser, on the other hand, in the same
proportion that the aggregate amount of such remaining disputed items so
submitted to the Independent Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items so submitted.
(iii)In acting under this Agreement, the Stockholders'
Accountants, the Purchaser's Accountants and the Independent Accounting Firm
shall be entitled to the privileges and immunities of arbitrators.
(iv) The Stockholder Representative, the Stockholders' Accountants
and their respective representatives shall be given reasonable access during
normal working hours upon reasonable notice to all the accounting books and
records of the Company and the work papers of the Purchaser's Accountants
relating to the preparation of the Closing Balance Sheet.
(v) No adjustment to the Purchase Price pursuant to Section
2.06(c) shall be made with respect to amounts disputed by the Stockholders
pursuant to this Section 2.06(b), unless the net effect of the amounts
successfully disputed by the Stockholders in the aggregate is to increase or
decrease the Book Value reflected on the Closing Balance Sheet by at least the
Designated Amount.
(c) Purchase Price Adjustment. The Closing Balance Sheet shall be
deemed final for the purposes of this Section 2.06 upon the earliest of (A) the
failure of the Stockholder Representative to notify the Purchaser, on behalf of
the Stockholders, of a dispute within 30 Business Days of the Purchaser's
delivery of the Closing Balance Sheet to the Stockholder Representative, (B) the
resolution of all disputes, pursuant to Section 2.06(b)(ii), by the
Stockholders' Accountants and the Purchaser's Accountants and (C) the resolution
of all disputes, pursuant to Section 2.06(b)(ii), by the Independent Accounting
Firm. Subject to the limitation set forth in Section 2.06(b)(v), an
adjustment to the Purchase Price shall be made as follows:
(i) in the event that the Book Value reflected on the Reference
Balance Sheet exceeds the Book Value reflected on the Closing Balance Sheet by
at least the Designated Amount, then the Purchase Price shall be adjusted
downward in an amount equal to such excess over the Designated Amount. Promptly
following such determination, but in any event within three (3) Business Days,
the Purchaser shall deliver written notice to the Escrow Agent and the
Stockholder Representative specifying the amount of such downward adjustment of
the Purchase Price, and the Escrow Agent shall, within three (3) Business Days
of its receipt of such notice and in accordance with the terms of the Escrow
Agreement, pay such amount to the Purchaser out of the Adjustment Escrow Fund by
wire transfer in immediately available funds. In the event that the Adjustment
Escrow Fund is insufficient to cover the amount of such downward adjustment,
then the Escrow Agent shall distribute the entire Adjustment Escrow Fund to the
Purchaser as provided above and the Stockholders shall pay, on or prior to the
date on which the Escrow Agent distributes the Adjustment Escrow Fund to the
Purchaser, an amount to the Purchaser, by wire transfer in immediately available
funds to an account designated by the Purchaser in a written notice to the
Stockholder Representative, equal to the amount of such deficiency. In the
event that any Stockholder shall fail to pay the amount of such deficiency
within the period specified in the immediately preceding sentence, the Purchaser
may deliver written notice to the Escrow Agent and the Stockholder
Representative specifying such amount, and the Escrow Agent shall, within three
Business Days of its receipt of such notice and in accordance with the terms of
the Escrow Agreement, pay such amount to the Purchaser out of the Indemnity
Escrow Fund by wire transfer in immediately available funds. No failure of the
Purchaser to deliver a notice of the type specified in the immediately preceding
sentence shall relieve the Stockholders of the obligation to pay the amount of
such deficiency to the Purchaser. In the event that the amount of funds in the
Adjustment Escrow Fund exceeds the amount of the downward adjustment of the
Purchase Price provided for in the first sentence of this Section 2.06(c)(i),
then the Escrow Agent shall, after paying the amount due to the Purchaser as
provided in such sentence, pay the remaining amount of funds in the Adjustment
Escrow Fund to the Stockholder Representative; and
(ii) in the event that the Book Value reflected on the Closing
Balance Sheet exceeds the Book Value reflected on the Reference Balance Sheet by
at least the Designated Amount, then the Purchase Price shall be adjusted upward
in an amount equal to such excess over the Designated Amount and the Purchaser
shall, within three Business Days of such determination, pay the amount of such
excess to the Stockholders by wire transfer in immediately available funds. In
such event, the Purchaser shall, within three (3) Business Days, deliver written
notice to the Escrow Agent of such an event and the Escrow Agent shall, within
three (3) Business Days of its receipt of such notice and in accordance with the
terms of the Escrow Agreement, pay all funds in the Adjustment Escrow Fund to
the Stockholder Representative.
(e) Any payments required to be made by the Stockholders, the
Purchaser or the Escrow Agent pursuant to Section 2.06(c) shall bear interest
from the Closing Date through the date of payment at 8.0%.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
As an inducement to the Purchaser to enter into this Agreement, the Company
and the Stockholders hereby jointly and severally represent and warrant to the
Purchaser as follows:
SECTION 3.01. Authority of the Company and Each Stockholder. The Company
and each Stockholder have all necessary
power and authority to enter into this Agreement and the Escrow Agreement and
each Stockholder has all necessary power and
authority to enter into each Employment Agreement to which he is
a party, and the Company and each Stockholder have all necessary
power and authority to carry out their respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of
this Agreement and the Escrow Agreement by the Company and each Stockholder and
of each Employment Agreement by each Stockholder
that is a party thereto, the performance by the Company and each Stockholder of
their respective obligations hereunder and
thereunder and the consummation by the Company and each
Stockholder of the transactions contemplated hereby and thereby
have been duly authorized by all requisite action on the part of
the Company and each Stockholder. This Agreement and the Escrow Agreement have
been duly executed and delivered by the Company
and each Stockholder, and (assuming due authorization, execution
and delivery by the Purchaser and, in the case of the Escrow Agreement, the
Escrow Agent) this Agreement and the Escrow
Agreement constitute legal, valid and binding obligations of the Company and
each Stockholder enforceable against the Company and
each Stockholder in accordance with its terms. The Employment Agreements have
been duly executed and delivered by each
Stockholder who is a party thereto and (assuming due
authorization, execution and delivery by the Purchaser) shall constitute legal,
valid and binding obligations of such
Stockholder enforceable against such Stockholder in accordance
with their respective terms.
SECTION 3.02. Organization, Authority and Qualification of the Company.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of New
York and has all necessary power and authority to own, operate or lease the
properties and assets now owned, operated or leased by
it and to carry on the Business as it has been and is currently conducted. The
Company is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its
business makes such licensing or qualification necessary, except
for those failures which, when taken together with all other such failures,
would not have a Material Adverse Effect. True and
correct copies of the Certificate of Incorporation and By-laws of
the Company, each as in effect on the date hereof, have been
delivered by the Company to the Purchaser.
SECTION 3.03. Capital Stock and Ownership of the Company. (a) The
authorized capital stock of the Company consists of 10,000,000 shares of Common
Stock. As of the date
hereof, (i) 5,500,000 shares of Common Stock are issued and outstanding, all of
which are validly issued, fully paid and nonassessable, and (ii) 2,500,000
additional shares of Common Stock are held in the treasury of the Company. None
of the issued and outstanding shares of Common Stock was issued in
violation of any preemptive rights. Except for the Plans, there
are no options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character relating
to the Shares or obligating any of the Stockholders or the
Company to issue or sell any Shares, or any other interest in,
the Company. There are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares
of Common Stock or to provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in,
any other Person. The Shares constitute all the issued and outstanding capital
stock of the Company and, except for the Stockholders' Agreement, are owned of
record and beneficially by
the Stockholders free and clear of all Encumbrances. Upon consummation of the
transactions contemplated by this Agreement
and registration of the Shares in the name of the Purchaser in
the stock records of the Company, the Purchaser, assuming it
shall have purchased the Shares for value in good faith and
without notice of any adverse claim, will own all the issued and outstanding
capital stock of the Company free and clear of all Encumbrances. There are no
voting trusts, stockholder
agreements, proxies or other agreements or understandings in
effect with respect to the voting or transfer of any of the Shares.
(b) The stock register of the Company accurately
records: (i) the name and address of each Person owning Shares
and (ii) the certificate number of each certificate evidencing
shares of capital stock issued by the Company, the number of
shares evidenced by each such certificate, the date of issuance thereof and, in
the case of cancellation, the date of cancellation.
SECTION 3.04. Subsidiaries. (a) Section 3.04(a) of the Disclosure Schedule
sets forth a true and complete list of all Subsidiaries. The Company
shall deliver to the Purchaser within three (3) Business Days
after the date hereof a list setting forth each Subsidiary's
name, type of entity, jurisdiction and date of incorporation or organization,
authorized capital stock, partnership capital or equivalent, the number and type
of issued and outstanding shares
of capital stock, partnership interests or similar ownership
interests and the current ownership of such shares, partnership interests or
similar ownership interests.
(b) Other than the Subsidiaries, there are no other corporations,
partnerships, joint ventures, associations or other entities in which the
Company owns, of record or beneficially,
any direct or indirect equity or other interest or any right (contingent or
otherwise) to acquire the same.
(c) Each Subsidiary that is a corporation: (i) is a corporation duly
organized and validly existing under the laws of
its jurisdiction of incorporation, (ii) has all necessary power
and authority to own, operate or lease the properties and assets owned, operated
or leased by such Subsidiary and to carry on its business as it has been and is
currently conducted by such
Subsidiary and (iii) is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary, except for those failures which, when
taken together with all other such failures, would not have a Material Adverse
Effect. Each Subsidiary that
is not a corporation: (i) is duly organized and validly existing under the laws
of its jurisdiction of organization, (ii) has all necessary power and authority
to own, operate or lease the
properties and assets owned, operated or leased by such
Subsidiary and to carry on its business as it has been and is currently
conducted by such Subsidiary and (iii) is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary or desirable, except for those
failures which, when
taken together with all other such failures, would not have a
Material Adverse Effect.
(d) Except as set forth in Section 3.04(a) of the Disclosure Schedule,
all the outstanding shares of capital stock
of each Subsidiary that is a corporation are validly issued,
fully paid, nonassessable and free of preemptive rights and are
owned by the Company, whether directly or indirectly, free and
clear of all Encumbrances.
(e) There are no options, warrants, convertible
securities or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of any Subsidiary or
obligating the Company or any Subsidiary to issue
or sell any shares of capital stock of, or any other interest in,
any Subsidiary.
(f) True and complete copies of the certificate of incorporation and
by-laws (or similar organizational documents), in each case as in effect on the
date hereof, of each Subsidiary have been delivered by the Company to the
Purchaser.
(g) No Subsidiary is a member of (nor is any part of its business
conducted through) any partnership nor is any Subsidiary a participant in any
joint venture or similar arrangement.
(h) There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in
effect with respect to the voting or transfer of any shares of
capital stock of or any other interests in any Subsidiary.
(i) The stock register of each Subsidiary accurately records: (i) the
name and address of each Person owning shares
of capital stock of such Subsidiary and (ii) the certificate
number of each certificate evidencing shares of capital stock
issued by such Subsidiary, the number of shares evidenced by each
such certificate, the date of issuance thereof and, in the case
of cancellation, the date of cancellation.
SECTION 3.05. Corporate Books and Records. The minute books of the Company
and the Subsidiaries contain accurate records of all meetings and accurately
reflect
all material actions taken by the stockholders, the Boards of Directors and all
committees of the Boards of Directors of the
Company and the Subsidiaries. Within ten (10) Business Days
following the date hereof, the Company will make available to the Purchaser
complete and accurate copies of all such minute books
and of the stock register of the Company and each Subsidiary.
SECTION 3.06. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and
other actions referred to in Section 3.07, except as may result
from any facts or circumstances relating solely to the Purchaser,
the execution, delivery and performance of this Agreement and the Escrow
Agreement by the Company and the Stockholders and of each Employment Agreement
by the Stockholder who is party to such Employment Agreement do not and will not
(a) violate, conflict
with or result in the breach of any provision of the certificate
of incorporation or by-laws (or similar organizational documents)
of the Company or any Subsidiary, (b) conflict with or violate
(or cause an event that could have a Material Adverse Effect as a result of) any
Law or Governmental Order applicable to the
Company or any Subsidiary or (c) except as set forth in Section
3.06 of the Disclosure Schedule, conflict with, result in any
breach of, constitute a default (or event that with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on
any of the Shares or on any of the assets or properties of the
Company or any Subsidiary pursuant to, any note, bond, mortgage
or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which the Company or any
Subsidiary is a party or by which any of the
Shares or any of the assets or properties of the Company or any Subsidiary is
bound.
SECTION 3.07. Governmental Consents and Approvals. The execution, delivery
and performance of this
Agreement and the Escrow Agreement by the Company and each
Stockholder and of each Employment Agreement by the Stockholder
who is party to such Employment Agreement do not and will not
require any consent, approval, authorization or other order of,
action by, filing with or notification to any Governmental
Authority, except the notification requirements of the HSR Act.
SECTION 3.08. Financial Information; Books and Records. (a) True and
complete copies of (i) the audited consolidated balance sheet of the Company for
each of the three
fiscal years ended as of January 31, 1998, January 31, 1999 and January 31, 2000
and the related audited consolidated statements
of income, retained earnings, stockholders' equity and changes in financial
position of the Company, together with all related
notes and schedules thereto, accompanied by the reports thereon
of the Stockholders' Accountants (collectively referred to herein
as the "Financial Statements") and (ii) the unaudited
consolidated balance sheet of the Company as of April 30, 2000
and the related consolidated statements of income (collectively referred to
herein as the "Interim Financial Statements") have
been delivered by the Company to the Purchaser. The Financial Statements, the
Interim Financial Statements and the Reference
Balance Sheet (1) were prepared in accordance with the books of account and
other financial records of the Company and the Subsidiaries, (2) present fairly
the consolidated financial
condition and results of operations of the Company and the Subsidiaries as of
the dates thereof or for the periods covered thereby, (3) have been prepared in
accordance with U.S. GAAP
applied on a basis consistent with the past practices of the
Company and the Subsidiaries (except that no notes or schedules
have been prepared with respect to the Interim Financial
Statements) and (4) include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair
presentation of the consolidated financial condition of the
Company and the Subsidiaries and the results of the operations of
the Company and the Subsidiaries as of the dates thereof or for
the periods covered thereby.
(b) The books of account and other financial records
of the Company and the Subsidiaries: (i) reflect all items of
income and expense and all assets and Liabilities required to be reflected
therein in accordance with U.S. GAAP applied on a basis consistent with the past
practices of the Company and the Subsidiaries, respectively, and (ii) are in all
material respects complete and correct, and do not contain or reflect any
material inaccuracies or discrepancies.
SECTION 3.09. Absence of Undisclosed Liabilities. There are no Liabilities
of the Company or any Subsidiary, other than Liabilities (i) reflected or
reserved
against on the Reference Balance Sheet or (ii) incurred since the
date of the Reference Balance Sheet in the ordinary course of business,
consistent with past practice, of the Company and the Subsidiaries and which
would not have a Material Adverse Effect. Reserves are reflected on the
Reference Balance Sheet against all Liabilities of the Company and the
Subsidiaries, in amounts that
have been established on a basis consistent with the past
practices of the Company and the Subsidiaries and in accordance
with U.S. GAAP.
SECTION 3.10. Receivables. Section 3.10 of the Disclosure Schedule sets
forth
an aged list of the Receivables as of the Reference Balance Sheet
Date showing separately those Receivables that as of such date
had been outstanding for (i) 29 days or less, (ii) 30 to 59 days, (iii) 60 to 89
days, (iv) 90 to 119 days and (v) more than 119
days. Except to the extent, if any, reserved for on the
Reference Balance Sheet, all Receivables reflected on the
Reference Balance Sheet arose from, and the Receivables existing
on the Closing Date will have arisen from, the sale of Inventory
or services to Persons not affiliated with the Stockholders, the Company or any
Subsidiary and in the ordinary course of business consistent with past practice
and, except as reserved against on
the Reference Balance Sheet, constitute or will constitute, as
the case may be, only valid, undisputed and collectible claims of
the Company or a Subsidiary not subject to valid claims of setoff
or other defenses or counterclaims other than normal cash
discounts accrued in the ordinary course of business consistent
with past practice. All Receivables reflected on the Reference Balance Sheet or
arising from the date thereof until the Closing (subject to the reserve for bad
debts, if any, reflected on the Reference Balance Sheet) are or will be good and
have been collected or are or will be collectible, without resort to
litigation or extraordinary collection activity, within 120 days
of the Closing Date.
SECTION 3.11. Inventories. (a) Subject to amounts reserved therefor on the
Reference Balance Sheet, the values at which all Inventories are carried on the
Reference Balance Sheet reflect the historical inventory valuation policy of the
Company and the Subsidiaries of stating such Inventories at the lower of cost
(determined on the first-in, first-out method) or market value. The Company or
a Subsidiary, as the case may be, has good and marketable title to
the Inventories free and clear of all Encumbrances. The
Inventories do not consist of any items held on consignment to
the Company. Neither the Company nor any Subsidiary is under any obligation or
liability with respect to accepting returns of
items of Inventory or merchandise in the possession of their
customers other than in the ordinary course of business
consistent with past practice. No clearance or extraordinary
sale of the Inventories has been conducted since the Reference
Balance Sheet Date. Neither the Company nor any Subsidiary has acquired or
committed to acquire or manufacture Inventory for
sale which is not of a quality and quantity usable in the
ordinary course of business within a reasonable period of time
and consistent with past practice, nor has the Company or any Subsidiary changed
the price of any Inventory except for
(i) price reductions to reflect any reduction in the cost thereof
to the Company or such Subsidiary, (ii) reductions and increases responsive to
normal competitive conditions and consistent with
the Company's or such Subsidiary's past sales practices,
(iii) increases to reflect any increase in the cost thereof to
the Company or such Subsidiary and (iv) increases and reductions
made with the written consent of the Purchaser. Section 3.11 of
the Disclosure Schedule sets forth a complete list of the
addresses of all warehouses and other facilities in which the Inventories are
located.
(b) The Inventories are in good and merchantable
condition in all material respects, are suitable and usable for
the purposes for which they are intended and are in a condition
such that they can be sold in the ordinary course of the Business consistent
with past practice. The Inventories reflected on the Reference Balance Sheet
were as of the date of the Reference
Balance Sheet salable at values not less than the respective book value amounts
shown on the Reference Balance Sheet. The value of
all items of obsolete, damaged and slow-moving materials and of materials of
below standard quality has been written down to realizable market value or has
been adequately reserved for on
the Reference Balance Sheet.
SECTION 3.12. Acquired Assets. Since the Reference Balance Sheet Date, all
the
assets of the Company and the Subsidiaries, including, without limitation, the
benefit of any licenses, leases or other
agreements or arrangements, have been acquired for consideration
not less than the fair market value of such assets at the date of
such acquisition.
SECTION 3.13. Sales and Purchase Order Backlog. (a) As of May 22, 2000,
open sales orders accepted
by the Company or any Subsidiary totaled approximately
$5,000,000. Within three (3) Business Days after the date
hereof, the Company shall deliver to the Purchaser a list of all
sales orders which have been accepted by the Company or any
Subsidiary and that were open as of May 22, 2000.
(b) As of May 22, 2000, open purchase orders issued by
the Company or any Subsidiary totaled $18,154,000. Within three
(3) Business Days after the date hereof, the Company shall
deliver to the Purchaser a list of all purchase orders which have
been issued by the Company or any Subsidiary and that were open
as of May 22, 2000.
SECTION 3.14. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Since the Reference Balance Sheet Date, the Business
has been conducted in the ordinary course and consistent with
past practice. As amplification and not limitation of the
foregoing, since the Reference Balance Sheet Date, neither the
Company nor any Subsidiary has:
(a) permitted or allowed any of the assets or properties of the
Company or any Subsidiary to be subjected to any Encumbrance, other than
Permitted Encumbrances and Encumbrances that will be released at or prior to the
Closing;
(b) except in the ordinary course of business consistent with past
practice, discharged or otherwise obtained the release of any Encumbrance
related to the Business, the Company or the Subsidiaries or paid or otherwise
discharged any Liability related to the Business, the Company or the
Subsidiaries, other than current liabilities reflected on the Reference Balance
Sheet and current liabilities incurred in the ordinary course of business
consistent with past practice since the Reference Balance Sheet Date;
(c) written down or written up (or failed to write down or write up in
accordance with U.S. GAAP consistent with past practice) the value of any
Inventories or Receivables or revalued any of the assets of the Company or any
Subsidiary other than in the ordinary course of business consistent with past
practice and in accordance with U.S. GAAP and except as would not have a
Material Adverse Effect;
(d) made any change in any method of accounting or accounting practice
or policy used by the Company or any Subsidiary;
(e) amended, terminated, cancelled or compromised any material claims
of the Company or any Subsidiary or waived any other rights of substantial value
to the Company or any Subsidiary;
(f) sold, transferred, leased, subleased, licensed or otherwise
disposed of any properties or assets, real, personal or mixed (including,
without limitation, leasehold interests and intangible property), except as
would not have a Material Adverse Effect, other than the sale of Inventories in
the ordinary course of business consistent with past practice;
(g) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of the
Company or any Subsidiary;
(h) redeemed any of the capital stock or declared, made or paid any
dividends or distributions (whether in cash, securities or other property) to
the holders of capital stock of the Company or any Subsidiary or otherwise,
other than dividends, distributions and redemptions declared, made or paid by
any Subsidiary solely to the Company;
(i) merged with, entered into a consolidation with or acquired an
interest of 5% or more in any Person or acquired a substantial portion of the
assets or business of any Person or any division or line of business thereof, or
otherwise acquired any material assets other than in the ordinary course of
business consistent with past practice;
(j) except as disclosed in Section 3.14(j) of the Disclosure Schedule,
made any capital expenditure or commitment for any capital expenditure in excess
of $25,000 individually or $100,000 in the aggregate;
(k) except as disclosed to the Purchaser in writing within three (3)
Business Days after the date hereof, issued any purchase orders or otherwise
agreed to make any purchases involving exchanges in value in excess of $100,000
individually;
(l) made any material changes in the customary methods of operations
of the Company, any Subsidiary or the Business, including, without limitation,
practices and policies relating to manufacturing, purchasing, Inventories,
marketing, selling and pricing;
(m) made, revoked or changed any express or deemed Tax election or
method of Tax accounting or settled or compromised any liability with respect to
Taxes of the Company or any Subsidiary;
(n) incurred any Indebtedness in excess of $100,000 individually or
$1,000,000 in the aggregate;
(o) made any loan to, guaranteed any Indebtedness of or otherwise
incurred any Indebtedness on behalf of any Person;
(p) failed to pay any creditor any amount owed to such creditor when
due, except as would not have a Material Adverse Effect;
(q) (i) granted any increase, or announced any increase, in the wages,
salaries, compensation, bonuses, incentives, pension or other benefits payable
by the Company or any Subsidiary to any of its employees, including, without
limitation, any increase or change pursuant to any Plan, or (ii) established or
increased or promised to increase any benefits under any Plan, in either case
except as required by Law or any collective bargaining agreement and involving
ordinary increases consistent with the past practices of the Company or such
Subsidiary;
(r) entered into any agreement, arrangement or transaction with any of
its directors, officers, employees or stockholders (or with any relative,
beneficiary, spouse or Affiliate of such Persons);
(s) disclosed any secret or confidential Intellectual Property (except
by way of issuance of a patent) or
permitted to lapse or become abandoned any Intellectual
Property (or any registration or grant thereof or any
application relating thereto) to which, or under which, the Company or any
Subsidiary has any right, title, interest or license;
(t) allowed any Permit or Environmental Permit that
was issued or relates to the Company or any Subsidiary or otherwise relates
to the Business to lapse or terminate or
failed to renew any insurance policy, Permit or
Environmental Permit that is scheduled to terminate or
expire within 45 calendar days of the Closing Date;
(u) failed to maintain the Company's and each
Subsidiary's property and equipment in good repair and
operating condition, ordinary wear and tear excepted;
(v) suffered any casualty loss or damage with respect
to any of the Assets that in the aggregate have a
replacement cost of more than $50,000, whether or not such casualty loss or
damage shall have been covered by
insurance;
(w) amended, modified or consented to the termination
of any Material Contract or the Company's or any
Subsidiary's rights thereunder;
(x) amended or restated the certificate of
incorporation or by-laws (or other organizational documents)
of the Company or any Subsidiary;
(y) made any charitable contribution;
(z) suffered any Material Adverse Effect; or
(aa) agreed, whether in writing or otherwise, to take
any of the actions specified in this Section 3.14 or granted
any options to purchase, rights of first refusal, rights of
first offer or any other similar rights or commitments with respect to any
of the actions specified in this
Section 3.14, except as expressly contemplated by this
Agreement and the Ancillary Agreements.
SECTION 3.15. Litigation. Except as set forth in Section 3.15 of the
Disclosure Schedule (which, with respect to each Action disclosed therein, sets
forth the parties, nature of the proceeding, date
and method commenced, amount of damages or other relief sought
and, if applicable, paid or granted), there are no Actions by or against the
Company or any Subsidiary (or by or against any Stockholder or any Affiliate
thereof and relating to the
Business, the Company or any Subsidiary) or involving any of the Assets or the
Business pending before any Governmental Authority
(or, to the knowledge of the Company, threatened to be brought by
or before any Governmental Authority). None of the matters
disclosed in Section 3.15 of the Disclosure Schedule has or has
had a Material Adverse Effect. None of the Company, the
Subsidiaries or any of their respective assets or properties is subject to any
Governmental Order (nor, to the knowledge of the Company, are there any such
Governmental Orders threatened to be imposed by any Governmental Authority).
SECTION 3.16. Compliance with Laws. The Company and the Subsidiaries have
each conducted
and continue to conduct the Business in material compliance with
all Laws and Governmental Orders applicable to the Company or any Subsidiary or
any of their properties or assets, or the Business,
and neither the Company nor any Subsidiary is in material
violation of any such Law or Governmental Order.
SECTION 3.17. Environmental and Other Permits and Licenses; Related Matter.
(a) Except as would not reasonably be expected to have a
Material Adverse Effect: (i) the Company and each Subsidiary are
in compliance with, and for the past three years have been in compliance with,
all applicable Environmental Laws and all Environmental Permits; (ii) Hazardous
Materials have not been generated, used, treated, handled or stored on,
transported to or from, or Released on any of the Real Property or, to the
knowledge of the Company, any property adjoining any of the Real Property, by
the Company or, to the knowledge of the Company, any other Person; (iii) there
is no asbestos or asbestos-containing material on any of the Real Property; (iv)
none of the Real
Property is listed or proposed for listing, or adjoins any other property that
is listed or proposed for listing, on the National Priorities List or CERCLIS or
on any analogous federal, state or
local list; and (v) there are no Environmental Claims pending or,
to the knowledge of the Company, threatened against the Company,
any Subsidiary, the Business or the Real Property and, to the knowledge of the
Company, there are no circumstances that can reasonably be expected to form the
basis of any such
Environmental Claim.
(b) The Company has provided the Purchaser with copies
of (i) any environmental assessment or audit reports or other
similar studies or analyses relating to the Company, the
Subsidiaries, the Business or the Real Property and (ii) all
insurance policies issued at any time that may provide coverage
to the Company, the Subsidiaries, the Business or the Real
Property for environmental matters.
(c) Neither the execution of this Agreement nor the consummation of
the transactions contemplated herein will require
any Remedial Action or notice to or consent of Governmental Authorities or third
parties pursuant to any applicable
Environmental Law or Environmental Permit.
SECTION 3.18. Material Contracts. (a) Within three (3) Business Days after
the date hereof, the Company shall deliver to the Purchaser a list of each
of the following contracts and agreements of the Company and the Subsidiaries
(such contracts and agreements, together with all contracts, agreements, leases
and subleases concerning the
management or operation of any Real Property (including, without limitation,
brokerage contracts) listed or otherwise disclosed in Section 3.20(a) or 3.20(b)
of the Disclosure Schedule to which
the Company or any Subsidiary is a party and all agreements
relating to Intellectual Property set forth in Section 3.19(a) of
the Disclosure Schedule, being "Material Contracts"):
(i) each contract, agreement, invoice, purchase order
and other arrangement, for the purchase of Inventory, spare parts, other
materials or personal property with any
supplier or for the furnishing of services to the Company,
any Subsidiary or otherwise related to the Business, under
the terms of which the Company or any Subsidiary: (A) is
likely to pay or otherwise give consideration of more than $100,000 in the
aggregate during the calendar year ended
December 31, 2000, (B) is likely to pay or otherwise give consideration of
more than $250,000 in the aggregate over
the remaining term of such contract or (C) cannot cancel
without penalty or further payment and without more than 30
days' notice;
(ii) each contract, agreement, invoice, sales order and other
arrangement for the sale of Inventory or other
personal property or for the furnishing of services by the Company or any
Subsidiary that: (A) is likely to involve consideration of more than
$100,000 in the aggregate during
the calendar year ended December 31, 2000, (B) is likely to involve
consideration of more than $250,000 in the aggregate
over the remaining term of the contract, or (C) cannot be cancelled by the
Company or such Subsidiary without penalty
or further payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer,
manufacturer's representative, franchise, agency, sales promotion, market
research, marketing, consulting,
advertising, freight and rebate contracts and agreements to
which the Company or any Subsidiary is a party;
(iv) all management contracts and contracts with independent
contractors or consultants (or similar
arrangements) to which the Company or any Subsidiary is a
party and which are not cancellable without penalty or
further payment and without more than 30 days' notice;
(v) all contracts and agreements relating to
Indebtedness of the Company or any Subsidiary;
(vi) all contracts and agreements with any Governmental Authority to
which the Company or any Subsidiary is a party;
(vii) all contracts and agreements that limit or
purport to limit the ability of the Company or any
Subsidiary to compete in any line of business or with any
Person or in any geographic area or during any period of
time;
(viii) all contracts and agreements between or among
the Company or any Subsidiary, on one hand, and any
Stockholder or any Affiliate of any Stockholder, on the
other hand;
(ix) all contracts and agreements providing for
benefits under any Plan; and
(x) all other contracts and agreements, whether or not
made in the ordinary course of business, that are material
to the Company or any Subsidiary or to the conduct of the Business, or the
absence of which would have a Material
Adverse Effect.
For purposes of this Section 3.18 and Sections 3.20, 3.21 and
3.22, the term "lease" shall include any and all leases,
subleases, sale/leaseback agreements or similar arrangements.
(b) Each Material Contract: (i) is valid and binding
on the parties thereto and is in full force and effect, (ii) is
freely and fully assignable to the Purchaser without penalty or
other adverse consequences and (iii) upon consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, except to the
extent that any consents set forth in Section 3.07 of the Disclosure Schedule
are not obtained, shall continue in full force and effect without penalty or
other
adverse consequence. Neither the Company nor any Subsidiary is
in breach of, or default under, any Material Contract.
(c) To the knowledge of the Company, no other party to
any Material Contract is in breach thereof or default thereunder.
(d) There is no contract, agreement or other
arrangement granting any Person any preferential right to
purchase, other than in the ordinary course of business
consistent with past practice, any of the properties or assets of
the Company or any Subsidiary.
SECTION 3.19. Intellectual Property. (a) Within three (3) Business Days
after the date hereof, the Company shall deliver to the Purchaser a true and
complete list of (i) all patents and patent applications,
registered trademarks and trademark applications, registered copyrights and
copyright applications, and domain names included
in the Owned Intellectual Property (excluding Trade Secrets),
(ii) Licenses and (iii) other Owned Intellectual Property
material to the Business (excluding Trade Secrets).
(b) The operation of the Business as currently
conducted or as contemplated to be conducted, the use of the
Owned Intellectual Property and Licensed Intellectual Property in connection
therewith and the Company's or any Subsidiary's transmission, use, linking and
other practices related to the operation of its web site in connection with the
Business, the
content thereof and the advertisements contained therein, do not conflict with,
infringe, misappropriate or otherwise violate the Intellectual Property or other
proprietary rights, including
rights of privacy, publicity and endorsement, of any third party,
and no Actions are pending or threatened against the Company or
any Subsidiary alleging any of the foregoing.
(c) The Company is the exclusive owner of the entire
and unencumbered right, title and interest in and to the Owned Intellectual
Property and Licenses, and the Company is entitled
to use the Owned Intellectual Property and Licensed Intellectual Property in the
ordinary course of the Business as presently
conducted or as contemplated to be conducted.
(d) The Owned Intellectual Property and Licensed Intellectual
Property include all of the Intellectual Property
used in the ordinary day-to-day conduct of the Business, and
there are no other items of Intellectual Property that are
material to such ordinary day-to-day conduct thereof. The Owned Intellectual
Property and, to the knowledge of the Company, the Licensed Intellectual
Property are subsisting, valid and
enforceable and have not been adjudged invalid or unenforceable
in whole or part.
(e) No Actions have been asserted, are pending or, to
the knowledge of the Company, are threatened against the Company
or any Subsidiary (i) based upon or challenging or seeking to
deny or restrict the use by the Company or any Subsidiary of any
of the Owned Intellectual Property or Licensed Intellectual
Property, (ii) alleging that any services provided by, processes
used by or products manufactured or sold by the Company or any Subsidiary in
connection with the Business infringe or
misappropriate any Intellectual Property right of any third party
or (iii) alleging that the Licensed Intellectual Property is
being licensed or sublicensed in conflict with the terms of any license or other
agreement.
(f) To the knowledge of the Company, no person is
engaging in any activity that infringes the Owned Intellectual Property or
Licensed Intellectual Property. Neither the Company
nor any Subsidiary has granted any license or other right to any
third party with respect to the Owned Intellectual Property or Licensed
Intellectual Property.
(g) The Company shall make available to the Purchaser within three
(3) Business Days after the date hereof correct and complete copies of all the
agreements included in the Licenses.
With respect to each such agreement:
(i) such agreement is valid and binding and in full
force and effect and represents the entire agreement between
the respective licensor and licensee with respect to the
subject matter of such agreement;
(ii) such agreement will not cease to be valid and
binding and in full force and effect on terms identical to
those currently in effect as a result of the consummation of
the transactions contemplated by this Agreement, nor will
the consummation of the transactions contemplated by this Agreement
constitute a breach or default under such
agreement or otherwise give the licensor a right to
terminate such agreement;
(iii) neither the Company nor any Subsidiary has
(A) received any notice of termination or cancellation under
such agreement, (B) received any notice of breach or default under such
agreement, which breach has not been cured, or
(C) granted to any other third party any rights, adverse or otherwise,
under such agreement that would constitute a
breach of such agreement; and
(iv) to the knowledge of the Company, neither the
Company, any Subsidiary nor any other party to such
agreement is in breach or default thereof in any material respect, and no
event has occurred that, with notice or
lapse of time, would constitute such a breach or default or permit
termination, modification or acceleration under such agreement.
(h) To the knowledge of the Company (i) there has been
no misappropriation of any material trade secrets or other
material confidential Intellectual Property used in connection
with the Business by any person, (ii) no employee, independent contractor or
agent of the Company or any Subsidiary has misappropriated any trade secrets of
any other person in the
course of performance as an employee, independent contractor or
agent of the Business, and (iii) no employee, independent
contractor or agent of the Company or any Subsidiary is in
default or breach of any term of any employment agreement, nondisclosure
agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of
Intellectual Property.
(i) Except as would not have a Material Adverse
Effect, all Company Systems are Year 2000 Compliant.
SECTION 3.20. Real Property. (a) Section 3.20(a) of the Disclosure
Schedule
lists: (i) the street address of each parcel of Owned Real
Property, (ii) the current owner of each such parcel of Owned
Real Property and (iii) the current use of each such parcel of
Owned Real Property.
(b) Section 3.20(b) of the Disclosure Schedule lists:
(i) the street address of each parcel of Leased Real Property,
(ii) the identity of the lessor, lessee and current occupant (if different from
lessee) of each such parcel of Leased Real
Property and (iii) the current use of each such parcel of Leased
Real Property.
(c) The Company has made available to the Purchaser,
or shall make available to the Purchaser within three (3)
Business Days after the date hereof, true, legible and complete copies, to the
extent available, of all the title insurance
policies, title reports, surveys, certificates of occupancy, environmental
reports and audits, appraisals, Permits, other Encumbrances, title documents and
other documents relating to or otherwise affecting the Real Property, the
operations of the
Company or any Subsidiary thereon or any other uses thereof.
Either the Company or a Subsidiary, as the case may be, is in
peaceful and undisturbed possession of each parcel of Real
Property. Neither the Company nor any Subsidiary has leased or subleased any
parcel or any portion of any parcel of Real
Property to any other Person and no other Person has any rights
to the use, occupancy or enjoyment thereof pursuant to any lease, sublease,
license, occupancy or other agreement, nor has the
Company or any Subsidiary assigned its interest under any lease
or sublease listed in Section 3.20(b) of the Disclosure Schedule
to any third party.
(d) The Company has, or has caused to be, delivered to
the Purchaser true and complete copies of all leases and
subleases listed in Section 3.20(b) of the Disclosure Schedule
and any and all ancillary documents (the "Ancillary Lease
Documents") pertaining thereto (including, but not limited to,
all amendments, modifications, supplements, exhibits, schedules, addenda and
restatements thereto and thereof and all consents, including, without
limitation, consents for alterations,
assignments and sublets, documents recording variations,
memoranda of lease, options, rights of expansion, extension,
first refusal and first offer and evidence of commencement dates
and expiration dates). With respect to each such lease and
sublease:
(i) such lease or sublease, together with all
Ancillary Lease Documents delivered pursuant to the first sentence of this
Section 3.20(d), is in full force and
effect and represents the entire agreement between the
respective landlord and tenant with respect to such Leased
Real Property;
(ii) such lease or sublease will not cease to be in
full force and effect on terms identical to those currently
in effect as a result of the consummation of the
transactions contemplated by this Agreement, nor will the consummation of
the transactions contemplated by this
Agreement constitute a breach or default under such lease or sublease or
otherwise give the landlord a right to terminate
such lease or sublease;
(iii) (A) neither the Company nor any Subsidiary
has received any notice of cancellation or termination under
such lease or sublease and (B) neither the Company nor any Subsidiary has
received any notice of a breach or default
under such lease or sublease, which breach or default has
not been cured;
(iv) none of the Company, any Subsidiary or, to the knowledge of the
Company, any other party to such lease or sublease is in breach or default
in any material respect
and, to the knowledge of the Company, no event has occurred
that, with notice or lapse of time, would constitute such a breach or
default or permit termination, modification or acceleration under such
lease or sublease; and
(v) neither the Company nor any Subsidiary has
exercised or given any notice of exercise of, nor has any
lessor or landlord exercised or received any notice of
exercise by a lessor or landlord of, any option, right of
first offer or right of first refusal contained in any such
lease or sublease, including, without limitation, any
pertaining to purchase, expansion, renewal, extension or relocation
(collectively, "Options").
(e) There are no condemnation proceedings or eminent
domain proceedings of any kind pending or, to the knowledge of
the Company, threatened against the Real Property.
(f) All the Real Property is occupied under a valid
and current certificate of occupancy or similar permit, the transactions
contemplated by this Agreement will not require the issuance of any new or
amended certificate of occupancy and, to
the knowledge of the Company, there are no facts that would
prevent the Real Property from being occupied by the Company or
any Subsidiary, as the case may be, after the Closing in the same manner as
occupied by the Company or such Subsidiary immediately
prior to the Closing.
(g) No improvements on the Real Property and none of
the current uses and conditions thereof violate any Encumbrance, applicable deed
restrictions or other applicable covenants, restrictions, agreements, existing
site plan approvals, zoning or subdivision regulations or urban redevelopment
plans as modified
by any duly issued variances, and no permits, licenses or
certificates pertaining to the ownership or operation of all improvements on the
Real Property, other than those which are transferable with the Real Property,
are required by any
Governmental Authority having jurisdiction over the Real
Property.
(h) All improvements on any Real Property are wholly
within the lot limits of such Real Property.
SECTION 3.21. Tangible Personal Property. The Company has good and valid
title to, or valid
and subsisting leasehold interests in, all tangible personal
property used by the Company or reflected on the Reference
Balance Sheet (the "Tangible Personal Property").
SECTION 3.22. Assets. (a) Either the Company or a Subsidiary, as the case
may be, owns, leases or has the legal right to use all the
properties and assets, including, without limitation, the Owned Intellectual
Property, the Licensed Intellectual Property, the Licenses, the Real Property
and the Tangible Personal Property,
used or intended to be used in the conduct of the Business or otherwise owned,
leased or used by the Company or any Subsidiary
and, with respect to contract rights, is a party to and enjoys
the right to the benefits of all contracts, agreements and other arrangements
used or intended to be used by the Company or any Subsidiary in or relating to
the conduct of the Business, all of
which properties, assets and rights constitute Assets. Either
the Company or a Subsidiary, as the case may be, has good and marketable title
to or, in the case of leased or subleased
Assets, valid and subsisting leasehold interests in, all the
Assets, free and clear of all Encumbrances, except (i) as
disclosed in Section 3.19(a), 3.20(a) or 3.20(b) of the
Disclosure Schedule and (ii) Permitted Encumbrances.
(b) The Assets constitute all the properties, assets
and rights forming a part of or used, held or intended to be used
in, and all such properties, assets and rights as are necessary
in the conduct of, the Business. At all times since the
Reference Balance Sheet Date, the Company has caused the Assets
to be maintained in accordance with good business practice, and
all the Assets are in good operating condition and repair and are suitable for
the purposes for which they are used and intended.
SECTION 3.23. Customers. Section 3.23 of the Disclosure Schedule sets
forth
the names and addresses of the ten most significant customers of
the Business (based on sales for the year ended January 31, 2000)
that ordered goods or merchandise from the Company or any
Subsidiary during the 12-month period ended January 31, 2000 and
the amount for which each such customer was invoiced during such period and
during the three-month period ended April 30, 2000.
Within three (3) Business Days after the date hereof, the Company
will make available to the Purchaser, and permit the Purchaser to copy, the
names and addresses of all the customers of the
Business that ordered goods or merchandise from the Company or
any Subsidiary for both the 12-month period ended January 31,
2000 and the three-month period ended April 30, 2000 and the
amount for which each such customer was invoiced during such
period. Neither the Company nor any Subsidiary has received any notice or has
any reason to believe that any significant customer
of the Business has ceased, or will cease, to use the products, equipment, goods
or services of the Company or any Subsidiary, or
has substantially reduced, or will substantially reduce, the use
of such products, equipment, goods or services at any time.
SECTION 3.24. Suppliers. Section 3.24 of the Disclosure Schedule sets
forth
the names and addresses of the ten most significant suppliers
(based on aggregate purchases for the year ended January 31,
2000) from which the Company or Subsidiary ordered raw materials, supplies,
merchandise and other goods for the Business during the 12-month period ended
January 31, 2000 and the amount for which
each such supplier invoiced the Company or any Subsidiary during
such period and during the three-month period ended April 30,
2000. Within three (3) Business Days following the date hereof,
the Company will make available to the Purchaser, and permit the Purchaser to
copy, the names and addresses of all the suppliers
from which the Company or any Subsidiary ordered raw materials, supplies,
merchandise and other goods for the Business for both
the 12-month period ended January 31, 2000 and the three-month
period ended April 30, 2000 and the amount for which each such supplier invoiced
the Company or any Subsidiary during such
period. Neither the Company nor any Subsidiary has received any notice or has
any reason to believe that any significant supplier
will not sell raw materials, supplies, merchandise and other
goods to the Company or any Subsidiary at any time after the
Closing Date on terms and conditions substantially similar to
those used in its current sales to the Business, subject only to general and
customary price increases.
SECTION 3.25. Employee Benefit Matters.
(a) Plans and Material Documents. Section 3.25(a) of the Disclosure
Schedule lists (i) all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock option, stock
purchase, restricted stock, incentive, deferred compensation, retiree medical or
life insurance, supplemental retirement, severance or other benefit plans,
programs or arrangements, and all employment, termination, severance, change
in control or other contracts or agreements to which the Company
or any Subsidiary is a party, with respect to which the Company
or any Subsidiary has any obligation or that are maintained, contributed to or
sponsored by the Company or any Subsidiary for
the benefit of any current or former employee, officer or
director of the Company or any Subsidiary, (ii) each employee
benefit plan for which the Company or any Subsidiary could incur liability under
Section 4069 of ERISA in the event such plan has
been or were to be terminated, (iii) any plan in respect of which
the Company or any Subsidiary could incur liability under
Section 4212(c) of ERISA and (iv) any contracts, arrangements or understandings
between any Stockholder or any Affiliate of any Stockholder and any employee of
the Company or of any Subsidiary, including, without limitation, any contracts,
arrangements or understandings relating to the sale of the Company
(collectively,
the "Plans"). Each Plan is in writing and the Company has made available to the
Purchaser a complete and accurate copy of each
Plan. The Company shall make available to the Purchaser within
three (3) Business Days after the date hereof a complete and
accurate copy of each material document prepared in connection
with each such Plan including, without limitation, (i) a copy of
each trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed IRS Form 5500,
(iv) the most recently received IRS determination letter for each such Plan and
(v) the most recently prepared actuarial report and financial statement in
connection
with each such Plan. Except as set forth in Section 3.25(a) of
the Disclosure Schedule, there are no other employee benefit
plans, programs, arrangements or agreements, whether formal or informal, whether
in writing or not, to which the Company or any Subsidiary is a party, with
respect to which the Company or any Subsidiary has any obligation or that are
maintained, contributed
to or sponsored by the Company or any Subsidiary for the benefit
of any current or former employee, officer or director of the
Company or any Subsidiary. Neither the Company nor any
Subsidiary has any express or implied commitment (i) to create,
incur liability with respect to or cause to exist any other
employee benefit plan, program or arrangement, (ii) to enter into
any contract or agreement to provide compensation or benefits to
any individual or (iii) to modify, change or terminate any Plan,
other than with respect to a modification, change or termination required by
ERISA or the Code.
(b) Absence of Certain Types of Plans. None of the
Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or
a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which the Company or any
Subsidiary could incur liability under Section 4063 or 4064 of
ERISA (a "Multiple Employer Plan"). None of the Plans provides
for the payment of separation, severance, termination or similar
type benefits to any Person or obligates the Company or any
Subsidiary to pay separation, severance, termination, retirement, enhanced
benefits or any acceleration, vesting, distribution or increase in benefit or
obligation or similar type benefits solely
as a result of any transaction contemplated by this Agreement or
as a result of a "change in control", within the meaning of such
term under Section 280G of the Code. None of the Plans provides
for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director
of the Company or any Subsidiary. Each of the Plans is subject
only to the laws of the United States or a political subdivision thereof.
(c) Compliance with Applicable Law. Each Plan is now
and always has been operated in all respects in accordance with
the requirements of all applicable Law, including, without
limitation, ERISA and the Code, and all persons who participate
in the operation of such Plans and all Plan "fiduciaries" (within
the meaning of Section 3(21) of ERISA) have acted in accordance
with the provisions of all applicable Law, including, without limitation, ERISA
and the Code. The Company and each Subsidiary
have performed all obligations required to be performed by them
under, are not in any respect in default under or in violation
of, and have no knowledge of any default or violation by any
party to, any Plan. No legal action, suit or claim is pending or threatened
with respect to any Plan (other than claims for
benefits in the ordinary course) and no fact or event exists that could give
rise to any such action, suit or claim.
(d) Qualification of Certain Plans. Each Plan that is intended to be
qualified under Section 401(a) of the Code or
Section 401(k) of the Code has received a favorable determination letter from
the IRS that it is so qualified and each trust
established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is
so exempt and no fact or event has occurred since the date of
such determination letter from the IRS to adversely affect the qualified status
of any such Plan or the exempt status of any
such trust. Each trust maintained or contributed to by the
Company or any Subsidiary which is intended to be qualified as a voluntary
employees' beneficiary association and which is
intended to be exempt from federal income taxation under
Section 501(c)(9) of the Code has received a favorable
determination letter from the IRS that it is so qualified and so exempt and no
fact or event has occurred since the date of such determination by the IRS to
adversely affect such qualified or
exempt status.
(e) Absence of Certain Liabilities and Events. With respect to the
Plans, no event has occurred and there exists no condition or set of
circumstances in connection with which the
Company or the Subsidiaries could be expected to be subject to
any liability under the terms of such plans, ERISA, the Code or
any other applicable Law.
(f) Plan Contributions and Funding. All
contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates.
All such contributions have been fully deducted for income tax purposes, no such
deduction has been challenged or disallowed by
any government entity and no fact or event exists that could give
rise to any such challenge or disallowance. As of the Closing
Date, no Plan that is subject to Title IV of ERISA will have an "unfunded
benefit liability" (within the meaning of
Section 4001(a)(18) of ERISA).
(g) Certain Employee Benefits Assets. Each of the guaranteed
investment contracts and other funding contracts with
any insurance company that are held by any of the Plans and any annuity
contracts purchased by (i) any of the Plans or (ii) any pension benefit plans
(as defined in Section 3(2) of ERISA) that provided benefits to any current or
former employees of the
Company or any Subsidiary was issued by an insurance company that carried the
highest rating from each of Duff & Phelps Credit
Rating Co., Standard & Poor's Insurance Rating Services,
A.M. Best Company and Moody's Investors Service, as of the date
such contract was issued, the date hereof and the Closing Date.
SECTION 3.26. Labor Matters. (a) Except as set forth in Section 3.26 of
the
Disclosure Schedule, neither the Company nor any Subsidiary is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any Subsidiary and currently
there are no organizational campaigns, petitions or other unionization
activities seeking recognition of
a collective bargaining unit within the Company or any
Subsidiary; (b) there are no controversies, strikes, slowdowns or
work stoppages pending or threatened between the Company or any Subsidiary and
any of their respective employees and neither the Company nor any Subsidiary has
experienced any such controversy, strike, slowdown or work stoppage within the
past three years;
(c) neither the Company nor any Subsidiary has breached or
otherwise failed to comply with the provisions of any collective bargaining or
union contract and there are no grievances
outstanding against the Company or any Subsidiary under any such agreement or
contract; (d) there are no unfair labor practice complaints pending against the
Company or any Subsidiary before
the National Labor Relations Board or any other Governmental
Authority or any current union representation questions involving employees of
the Company or any Subsidiary; (e) the Company and
each Subsidiary are currently in material compliance with all applicable Laws
relating to the employment of labor, including
those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by
the appropriate Governmental Authority, and have withheld and
paid to the appropriate Governmental Authority or are holding for payment not
yet due to such Governmental Authority all amounts required to be withheld from
employees of the Company or any Subsidiary and are not liable for any arrears of
wages, taxes, penalties or other sums for failure to comply with any of the
foregoing; (f) the Company and each Subsidiary have paid in full
to all their respective employees or adequately accrued for in accordance with
U.S. GAAP all wages, salaries, commissions,
bonuses, benefits and other compensation due to or on behalf of
such employees; (g) there is no claim with respect to payment of wages, salary
or overtime pay that has been asserted or is now
pending or threatened before any Governmental Authority with
respect to any Persons currently or formerly employed by the
Company or any Subsidiary; (h) neither the Company nor any
Subsidiary is a party to, or otherwise bound by, any consent
decree with, or citation by, any Governmental Authority relating
to employees or employment practices; (i) there is no charge or proceeding with
respect to a violation of any occupational safety
or health standards that has been asserted or is now pending or threatened with
respect to the Company or any Subsidiary; and
(j) there is no charge of discrimination in employment or
employment practices for any reason, including, without
limitation, age, gender, race, religion or other legally
protected category, that has been asserted or is now pending or threatened
before the United States Equal Employment Opportunity Commission or any other
Governmental Authority in any
jurisdiction in which the Company or any Subsidiary has employed
or currently employs any Person.
SECTION 3.27. Salaried Employees. (a) Within three (3) Business Days after
the date hereof, the Company will make available to the Purchaser, and
permit the Purchaser to copy, a list setting forth the name,
place of employment, the current annual salary rates, bonuses, deferred or
contingent compensation, pension, accrued vacation, "golden parachute" and other
like benefits paid or payable (in
cash or otherwise) in 1998, 1999 and 2000, the date of employment
and a description of position and job function of each current salaried
employee, officer, director, consultant or agent of the Company or any
Subsidiary.
(b) Section 3.27(b) of the Disclosure Schedule sets
forth the directors, officers, employees and other persons that
are under written obligation to the Company or any Subsidiary to maintain in
confidence all confidential or proprietary
information acquired in the course of employment or engagement
with the Company or any Subsidiary or to assign to the Company or
any Subsidiary all inventions made within the scope of employment
or engagement with the Company or any Subsidiary during such employment or
engagement. The Company and the Stockholders shall
use reasonable efforts to afford to the Purchaser as of the
Closing Date the benefits of the confidentiality provisions
relating to any director, officer, employee or other person set
forth in Section 3.27(b) of the Disclosure Schedule to the extent
that the benefits of such confidentiality provisions are not
provided to the Purchaser in this Agreement or an Employment Agreement.
SECTION 3.28. Certain Interests. (a) No stockholder, officer or director
of the
Company or any Subsidiary and no relative or spouse (or relative
of such spouse) who resides with, or is a dependent of, any such stockholder,
officer or director:
(i) has any direct or indirect financial interest in
any competitor, supplier or customer of the Company or any Subsidiary,
provided, however, that the ownership of
securities representing no more than 1% of the outstanding
voting power of any competitor, supplier or customer, that
are also listed on any national securities exchange or
traded actively in the national over-the-counter market,
shall not be deemed to be a "financial interest" so long as
the Person owning such securities has no other connection or relationship
with such competitor, supplier or customer;
(ii) owns, directly or indirectly, in whole or in part,
or has any other interest in any tangible or intangible
property that the Company or any Subsidiary uses or has used
in the conduct of the Business or otherwise; or
(iii) has outstanding any Indebtedness to the
Company or any Subsidiary.
(b) Except as set forth in Section 3.28(b) of the Disclosure
Schedule, neither the Company nor any Subsidiary has
any Liability or any other obligation of any nature whatsoever to
any officer, director or stockholder of the Company or any
Subsidiary or to any relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any such officer, director or
stockholder.
SECTION 3.29. Taxes. (a) (i) All returns and reports in respect of Taxes
required to be filed with respect to the Company and each
Subsidiary have been timely filed; (ii) all Taxes required to be
shown on such returns and reports or otherwise due have been
timely paid; (iii) all such returns and reports (insofar as they relate to the
activities or income of the Company or any
Subsidiary) are true, correct and complete in all material
respects; (iv) no adjustment relating to such returns has been proposed formally
or informally by any Tax authority (insofar as either relates to the activities
or income of the Company or any Subsidiary or could result in liability of the
Company or any Subsidiary on the basis of joint and/or several liability) and,
to the knowledge of the Company, no basis exists for any such adjustment; (v)
there are no pending or, to the knowledge of the Company, threatened actions or
proceedings for the assessment or collection of Taxes against the Company or any
Subsidiary;
(vi) no consent under section 341(f) of the Code has been filed
with respect to the Company or any Subsidiary or of the Business; (vii) all
sales and license transactions between the Company and
any Subsidiary, and between any of the Subsidiaries, have been conducted on an
arm's-length basis; (viii) the Company has not
been at any time a member of any partnership or joint venture or
the holder of a beneficial interest in any trust for any period
for which the statute of limitations for any Tax has not expired;
(ix) neither the Company nor any Subsidiary is subject to any accumulated
earnings tax, personal holding company tax or similar
tax; and (x) neither the Company nor any Subsidiary is or has
been a U.S. real property holding corporation within the meaning
of section 897 of the Code.
(b) (i) There are no outstanding waivers or agreements extending the
statute of limitations for any period with respect
to any Tax to which the Company, any Subsidiary or the Business
may be subject; (ii) there are no requests for information
currently outstanding that could affect the Taxes of the Company,
any Subsidiary or the Business; (iii) there are no proposed reassessments of any
property owned by the Company or any
Subsidiary or other proposals that could increase the amount of
any Tax to which the Company, any Subsidiary or the Business
would be subject; and (iv) no power of attorney that is currently
in force has been granted with respect to any matter relating to
Taxes that could affect the Company.
(c) (i) Section 3.29(c) of the Disclosure Schedule
lists all income, franchise and similar tax Returns (federal,
state, local and foreign) filed with respect to each of the
Company and the Subsidiaries for taxable periods ended on or
after December 31, 1996, indicates the most recent income,
franchise or similar tax Return for each relevant jurisdiction
for which an audit has been completed or the statute of
limitations has lapsed and indicates all tax Returns that
currently are the subject of audit; and (ii) the Stockholders
have made available to the Purchaser, or shall make available to
the Purchaser within three (3) Business Days after the date
hereof, correct and complete copies of all federal, state and
foreign income, franchise and similar tax Returns, examination reports, and
statements of deficiencies assessed against or
agreed to by the Company or any Subsidiary since December 31,
1996.
(d) For purposes of determining whether the conditions
to Closing have been satisfied (but not for purposes of the Stockholders'
indemnification of the Purchaser pursuant to
Section 7.01(a)), the representations in Section 3.29(a) shall
apply only with respect to items that could have a Material
Adverse Effect on the Company, any Subsidiary, or the Business.
For purposes of the Stockholders' indemnification of the
Purchaser pursuant to Section 7.01(a), the representations in
Section 3.29(a) shall be deemed to have been made with no
exception.
(e) On the Reference Balance Sheet, reserves and
allowances have been provided, and on the Closing Balance Sheet reserves and
allowances will be provided, in each case adequate
to satisfy all Liabilities for Taxes relating to the Company, the Subsidiaries
and the Business for periods through the Closing
Date (without regard to the materiality thereof).
SECTION 3.30. Insurance. (a) Section 3.30(a) of the Disclosure Schedule
sets forth the following information with respect to each insurance
policy (including policies providing property, casualty,
liability, workers' compensation, and bond and surety
arrangements) under which the Company or any Subsidiary has been
an insured, a named insured or otherwise the principal
beneficiary of coverage at any time within the past three years:
(i) the name, address and telephone number of the
agent or broker;
(ii) the name of the insurer and the names of the
principal insured and each named insured;
(iii) the policy number and the period of coverage;
(iv) the type, scope (including an indication of
whether the coverage was on a claims made, occurrence or
other basis) and amount (including a description of how deductibles,
retentions and aggregates are calculated and operate) of coverage; and
(v) the premium charged for the policy, including,
without limitation, a description of any retroactive premium adjustments or
other loss-sharing arrangements.
(b) With respect to each such insurance policy:
(i) the policy is legal, valid, binding and enforceable in
accordance with its terms and, except for policies that have
expired under their terms in the ordinary course, is in full
force and effect; (ii) neither the Company nor any Subsidiary is
in breach or default (including any breach or default with
respect to the payment of premiums or the giving of notice), and
no event has occurred that, with notice or the lapse of time,
would constitute such a breach or default or permit termination
or modification, under the policy; (iii) no party to the policy
has repudiated, or given notice of an intent to repudiate, any provision
thereof; and (iv) to the knowledge of the Company, no insurer on the policy has
been declared insolvent or placed in receivership, conservatorship or
liquidation or currently has a
rating of "B+" or below from A.M. Best & Co. or a claims-paying ability rating
of "BBB" or below from Standard & Poor's, Inc.
(c) There are no risks against which the Company or
any Subsidiary is self-insured or which are covered under any
risk retention program in which the Company or any Subsidiary participates.
(d) All material assets, properties and risks of the Company and each
Subsidiary are, and for the past five years have been, covered by valid and,
except for policies that have expired under their terms in the ordinary course,
currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company
or a Subsidiary, as the case may be, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices
and standards of companies engaged in businesses and operations similar to those
of the Company or such Subsidiary, as the case
may be.
(e) At no time subsequent to December 31, 1997 has the Company or any
Subsidiary (i) been denied any insurance or
indemnity bond coverage that it has requested, (ii) made any
material reduction in the scope or amount of its insurance
coverage or received notice from any of its insurance carriers
that any insurance premiums will be subject to increase in an
amount materially disproportionate to the amount of the increases
with respect thereto (or with respect to similar insurance) in
prior years or that any insurance coverage listed in
Section 3.30(a) of the Disclosure Schedule will not be available
in the future on substantially the same terms as those that are
now in effect or (iii) suffered any extraordinary increase in
premium for renewed coverage. Since January 1, 1998, no
insurance carrier has cancelled, failed to renew or materially
reduced any insurance coverage for the Company or any Subsidiary
or given any notice or other indication of its intention to
cancel, not renew or reduce any such coverage.
(f) At the time of the Closing, all insurance policies currently in
effect will be outstanding and duly in force.
(g) All of the Assets are insurable on customary terms
at commercially reasonable rates and no Asset will cease to be insurable on
terms substantially similar to those in effect as of
the date hereof as a result of the consummation of the
transactions contemplated by this Agreement.
(h) No insurance policy listed in Section 3.30(a) of
the Disclosure Schedule will cease to be legal, valid, binding, enforceable in
accordance with its terms and in full force and
effect on terms identical to those in effect as of the date
hereof as a result of the consummation of the transactions contemplated by this
Agreement.
SECTION 3.31. Accounts; Lockboxes; Safe Deposit Boxes; Powers of Attorney.
Section 3.31 of the Disclosure Schedule is a true
and complete list of (a) the names of each bank, savings and loan association,
securities or commodities broker or other financial institution in which the
Company or any Subsidiary has an
account, including cash contribution accounts, and the names of
all persons authorized to draw thereon or have access thereto,
(b) the location of all lockboxes and safe deposit boxes of the Company and each
Subsidiary and the names of all Persons
authorized to draw thereon or have access thereto and (c) the
names of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary. At the time of the Closing, without
the prior written consent of the Purchaser, neither the Company
nor any Subsidiary shall have any such account, lockbox or safe deposit box
other than those listed in Section 3.31 of the
Disclosure Schedule, nor shall any additional Person have been authorized, from
the date of this Agreement, to draw thereon or
have access thereto or to hold any such power of attorney
relating to the Company, any Subsidiary or the Business or from
the Company or any Subsidiary. Except as disclosed in
Section 3.31 of the Disclosure Schedule, the Stockholders have
not commingled monies or accounts of the Company or any
Subsidiary with other monies or accounts of the Stockholders nor
have the Stockholders transferred monies or accounts of the
Company or any Subsidiary other than to an account of the Company
or such Subsidiary. At the time of the Closing, all monies and accounts of the
Company and each Subsidiary shall be held by, and
be accessible only to, the Company or such Subsidiary.
SECTION 3.32. Full Disclosure. No representation or warranty of the
Company or any Stockholder in this Agreement, nor any statement or certificate
furnished or to be furnished to the Purchaser pursuant to this Agreement, or in
connection with the transactions contemplated by
this Agreement, contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
SECTION 3.33. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement
or the Ancillary Agreements based upon arrangements made by or on behalf of the
Company or any Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Company and each Stockholder to enter into this
Agreement, the Purchaser hereby represents and warrants to the Company and each
Stockholder as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser
is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of New York and has all necessary corporate power and authority
to enter into this Agreement and the Ancillary Agreements, to
carry out its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Ancillary
Agreements by the Purchaser, the performance by the Purchaser of
its obligations hereunder and thereunder and the consummation by
the Purchaser of the transactions contemplated hereby and thereby
have been duly authorized by all requisite action on the part of
the Purchaser. This Agreement and the Ancillary Agreements have
been duly executed and delivered by the Purchaser, and (assuming
due authorization, execution and delivery by the Company, each Stockholder that
is a party thereto and, in the case of the
Escrow Agreement, the Escrow Agent) this Agreement and the
Ancillary Agreements constitute legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser
in accordance with their respective terms.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and
other actions referred to in Section 4.03, except as may result
from any facts or circumstances relating solely to the Company or
any Stockholder, the execution, delivery and performance of this Agreement and
the Ancillary Agreements by the Purchaser, do not
and will not (a) violate, conflict with or result in the breach
of any provision of the Certificate of Incorporation or By-laws
of the Purchaser, (b) conflict with or violate any Law or
Governmental Order applicable to the Purchaser or (c) conflict
with, or result in any breach of, constitute a default (or event
that with the giving of notice or lapse of time, or both, would
become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of
the Purchaser pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise
or other instrument or arrangement to which the Purchaser is a
party or by which any of such assets or properties is bound, that would have a
material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by this Agreement or by
the Ancillary Agreements.
SECTION 4.03. Governmental Consents and Approvals. The execution, delivery
and performance of this
Agreement and each Ancillary Agreement by the Purchaser do not
and will not require any consent, approval, authorization or
other order of, action by, filing with, or notification to, any Governmental
Authority, except the requirements of the HSR Act.
SECTION 4.04. Investment Purpose. The Purchaser is acquiring the Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
SECTION 4.05. Litigation. No claim, action, proceeding or investigation is
pending or, to the knowledge of the Purchaser, threatened, which
seeks to delay or prevent the consummation of, or that would be reasonably
likely to materially adversely affect the Purchaser's ability to consummate, the
transactions contemplated by this
Agreement and the Ancillary Agreements.
SECTION 4.06. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing. (a) The Company
and the Stockholders covenant and
agree that, except as described in Section 5.01(a) of the
Disclosure Schedule, between the date hereof and the time of the Closing,
neither the Company nor any Subsidiary shall conduct its business other than in
the ordinary course and consistent with
the past practice of the Company or such Subsidiary. Without
limiting the generality of the foregoing, except as described in Section 5.01(a)
of the Disclosure Schedule, the Company shall and shall cause each Subsidiary to
(i) continue its advertising and promotional activities, and pricing and
purchasing policies, in accordance with past practice; (ii) not shorten or
lengthen the customary payment cycles for any of its payables or receivables;
(iii) use its reasonable best efforts to (A) preserve intact its business
organizations and the business organization of the
Business, (B) keep available to the Purchaser the services of the employees of
the Company and each Subsidiary, (C) continue in
full force and effect without material modification all existing policies or
binders of insurance currently maintained in respect
of the Company, each Subsidiary and the Business and (D) preserve
its current relationships with its customers, suppliers and other persons with
which it has significant business relationships;
(iv) exercise, but only after notice to the Purchaser and receipt
of the Purchaser's prior written approval, any rights of renewal pursuant to the
terms of any of the leases or subleases set forth
in Section 3.20(b) of the Disclosure Schedule that by its terms
would otherwise expire; and (v) not engage in any practice, take
any action, fail to take any action or enter into any transaction
that could cause any representation or warranty of the Company or
any Stockholder to be untrue in any material respect (or in the
case of any representation or and warranty that is qualified as
to materiality, that could cause such representation or warranty
to be untrue in any respect) or result in a breach of any
covenant made by the Company or any Stockholder in this
Agreement.
(b) Except as described in Section 5.01(b) of the Disclosure
Schedule, the Company and the Stockholders covenant
and agree that, prior to the Closing, without the prior written consent of the
Purchaser, neither the Company nor any Subsidiary
will do any of the things enumerated in the second sentence of
Section 3.14 (including, without limitation, clauses (a) through
(aa) thereof); provided that, the Company and the Subsidiaries
may issue purchase orders or otherwise agree to make any
purchases in the ordinary course of business to customers and in amounts
consistent with past practice to satisfy customer orders
or future business.
(c) Between the date hereof and the Closing, the
Company shall promptly make available to the Purchaser copies of,
and permit the Purchaser to copy, (i) each material purchase
order issued by the Company or any Subsidiary and (ii) each sales order.
SECTION 5.02. Access to Information. (a) From the date hereof until the
Closing, upon reasonable notice, the Company shall and shall cause its
officers, directors, employees, agents representatives,
accountants and counsel and shall cause the Subsidiaries and each
of the Subsidiaries' officers, directors, employees, agents, representatives,
accountants and counsel to: (i) afford the
officers, employees and authorized agents, accountants, counsel, financing
sources and representatives of the Purchaser reasonable access, during normal
business hours, to the offices, properties, plants, other facilities, books and
records of the Company and
each Subsidiary and to those officers, directors, employees,
agents, accountants and counsel of the Company and of each
Subsidiary who have any knowledge relating to the Company, any Subsidiary or the
Business and (ii) furnish to the officers,
employees and authorized agents, accountants, counsel, financing sources and
representatives of the Purchaser such additional
financial and operating data and other information regarding the assets,
properties and goodwill of the Company, the Subsidiaries
and the Business (or legible copies thereof) as the Purchaser may
from time to time reasonably request.
(b) In order to facilitate the resolution of any
claims made against or incurred by the Company or any Stockholder prior to the
Closing, for a period of seven years after the
Closing, the Purchaser shall (i) retain the books and records of
the Company and the Subsidiaries relating to periods prior to the Closing in a
manner reasonably consistent with the prior practice
of the Company and the Subsidiaries and (ii) upon reasonable
notice, afford any Stockholder reasonable access (including the
right to make, at the expense of such Stockholder, photocopies), during normal
business hours, to such books and records.
(c) In order to facilitate the resolution of any
claims made by or against or incurred by the Purchaser, the
Company or any Subsidiary after the Closing or for any other reasonable purpose,
for a period of seven years following the
Closing, each Stockholder shall (i) retain the books and records
of such Stockholder that relate to the Business, the Company and
the Subsidiaries and their operations for periods prior to the
Closing and that shall not otherwise have been delivered to the Purchaser, the
Company or any Subsidiary and (ii) upon reasonable notice, afford the officers,
employees and authorized agents and representatives of the Purchaser, the
Company or any Subsidiary reasonable access (including the right to make
photocopies, at
the expense of the Purchaser, the Company or such Subsidiary),
during normal business hours, to such books and records.
SECTION 5.03. Confidentiality. (a) Each Stockholder agrees to advise any
of its
agents, representatives and Affiliates with access to
Confidential Information of such Stockholder's obligations
hereunder with respect to Confidential Information, and shall,
and shall cause its agents, representatives or Affiliates to:
(i) except as required by Law, treat and hold as confidential
(and not disclose or provide access to any Person to) all
information relating to trade secrets, processes, patent and
trademark applications, product development, price, employees, customers and
suppliers, pricing and marketing plans, policies
and strategies, details of client, employee and consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and
all other confidential information with respect to the Business,
the Company and each Subsidiary ("Confidential Information"),
(ii) in the event that such Stockholder or any such agent, representative or
Affiliate becomes legally compelled to disclose
any Confidential Information, provide the Purchaser with prompt written notice
of such requirement so that the Purchaser, the
Company or any Subsidiary may seek a protective order or other
remedy or waive compliance with this Section 5.03(a), (iii) in
the event that such protective order or other remedy is not
obtained, or the Purchaser waives compliance with this
Section 5.03(a), furnish only that portion of such Confidential Information that
is legally required to be provided and exercise
his or her reasonable best efforts to obtain assurances that confidential
treatment will be accorded such information, and
(iv) promptly furnish (prior to, at, or as soon as practicable following, the
Closing) to the Company or the Purchaser any and
all copies (in whatever form or medium) of all Confidential Information then in
the possession of such Stockholder or any of
its agents, representatives or Affiliates and, except as
otherwise required by Section 5.02(c), destroy any and all
additional copies then in the possession of such Stockholder or
any of its agents, representatives or Affiliates and of any
analyses, compilations, studies or other documents prepared, in
whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the
time of disclosure, is available publicly and was not disclosed
in breach of this Agreement by such Stockholder, its agents, representatives or
Affiliates; provided further that, with
respect to Intellectual Property, specific information shall not
be deemed to be within the foregoing exception merely because it
is embraced in general disclosures in the public domain. In
addition, with respect to Intellectual Property, any combination
of features shall not be deemed to be within the foregoing
exception merely because the individual features are in the
public domain unless the combination itself and its principle of operation are
in the public domain. Each Stockholder agrees and acknowledges that remedies at
law for any breach of its
obligations under this Section 5.03(a) are inadequate and that in addition
thereto the Purchaser shall be entitled to seek
equitable relief, including injunction and specific performance,
in the event of any such breach.
(b) The Purchaser agrees to advise any of its agents,
representatives, Affiliates, employees, officers and directors
with access to Confidential Information of the Purchaser's
obligations hereunder with respect to Confidential Information
and shall, and shall cause its agents, representatives,
Affiliates, employees, officers and directors to: (i) except as required by
Law, treat and hold as confidential (and not disclose
or provide access to any Person to) all Confidential Information,
(ii) in the event that the Purchaser or any such agent, representative,
Affiliate, employee, officer or director becomes legally compelled to disclose
any such Confidential Information, provide the Company with prompt written
notice of such
requirement so that the Company may seek a protective order or
other remedy or waive compliance with this Section 5.03(b),
(iii) in the event that such protective order or other remedy is
not obtained, or the Company waives compliance with this
Section 5.03(b), furnish only that portion of such Confidential Information that
is legally required to be provided and exercise
its reasonable best efforts to obtain assurances that
confidential treatment will be accorded such information and (iv) except as
required by Law, use Confidential Information solely in connection with the
consideration and evaluation of the
transactions contemplated by this Agreement; provided, however,
that none of the foregoing obligations shall apply to the
Purchaser following the Closing. In the event this Agreement is terminated, the
Purchaser agrees not to, and shall cause its
agents, representatives, Affiliates, employees, officers and
directors not to, discuss or otherwise disclose, except as
required by Law, the circumstances leading to termination to the extent such
information is non-public, and shall, and shall cause
its agents, representatives, Affiliates, employees, officers and directors to,
destroy any and all copies (in whatever form or
medium) of all Confidential Information then in the possession of
the Purchaser or any of its agents, representatives, Affiliates, employees,
officers or directors and of any analyses,
compilations, studies or other documents prepared, in whole or in part, on the
basis thereof. This Section 5.03(b) shall not apply
to any information that, at the time of disclosure, is available publicly and
was not disclosed in breach of this Agreement by the Purchaser, its agents,
representatives, Affiliates, employees, officers and directors; provided that,
with respect to
Intellectual Property, specific information shall not be deemed
to be within the foregoing exception merely because it is
embraced in general disclosures in the public domain. In
addition, with respect to Intellectual Property, any combination
of features shall not be deemed to be within the foregoing
exception merely because the individual features are in the
public domain unless the combination itself and its principle of operation are
in the public domain. The Purchaser agrees and acknowledges that remedies at
law for any breach of its
obligations under this Section 5.03(b) are inadequate and that in addition
thereto the Stockholders shall be entitled to seek
equitable relief, including injunction and specific performance,
in the event of any such breach.
SECTION 5.04. Regulatory and Other Authorizations; Notices and Consents.
(a) The Company and the Stockholders shall use
their reasonable best efforts to obtain (or cause the
Subsidiaries to obtain) all authorizations, consents, orders and approvals of
all Governmental Authorities and officials that may
be or become necessary for its execution and delivery of, and the performance of
their obligations pursuant to, this Agreement and
the Ancillary Agreements and will cooperate fully with the
Purchaser in promptly seeking to obtain all such authorizations, consents,
orders and approvals. Each party hereto agrees to make
an appropriate filing pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement within five Business
Days of the date hereof and to supply as promptly as practicable
to the appropriate Governmental Authorities any additional
information and documentary material that may be requested
pursuant to the HSR Act.
(b) The Company and the Stockholders shall or shall
cause the Subsidiaries to give promptly such notices to third
parties and use their reasonable best efforts to obtain such
third party consents and estoppel certificates as the Purchaser
may in its sole and absolute discretion deem necessary or
desirable in connection with the transactions contemplated by
this Agreement.
(c) The Purchaser shall cooperate and use all
reasonable efforts to assist the Company and the Stockholders in giving such
notices and obtaining such consents and estoppel certificates; provided,
however, that the Purchaser shall have no obligation to give any guarantee or
other consideration of any
nature in connection with any such notice, consent or estoppel certificate or to
consent to any change in the terms of any
agreement or arrangement which the Purchaser in its sole and
absolute discretion may deem adverse to the interests of the Purchaser, the
Company, any Subsidiary or the Business.
(d) The parties hereto agree that, in the event that
any consent, approval or authorization necessary or desirable to preserve for
the Business, the Company or any Subsidiary any
right or benefit under any lease, license, contract, commitment
or other agreement or arrangement to which the Company or any Subsidiary is a
party is not obtained prior to the Closing, the Stockholders will, subsequent to
the Closing, cooperate with the Purchaser, the Company or any such Subsidiary in
attempting to
obtain such consent, approval or authorization as promptly
thereafter as practicable.
SECTION 5.05. Notice of Developments. Prior to the Closing, the Company
and the
Stockholders shall promptly notify the Purchaser in writing of
(a) all events, circumstances, facts and occurrences arising subsequent to the
date of this Agreement which could result in
any breach of a representation or warranty or covenant of the
Company or any Stockholder in this Agreement or which could have
the effect of making any representation or warranty of the
Company or any Stockholder in this Agreement untrue or incorrect
in any respect and (b) all other material developments affecting
the assets, Liabilities, business, financial condition,
operations, results of operations, customer or supplier
relations, employee relations, projections or prospects of the Company, any
Subsidiary or the Business.
SECTION 5.06. Use of Intellectual Property. (a) The Company and the
Stockholders acknowledge
that from and after the Closing, the name "Delco" and all similar
or related names, marks and logos (all of such names, marks and
logos being the "Company Marks") shall be owned by the Company or
a Subsidiary, that none of the Stockholders or any of their
Affiliates shall have any rights in the Company Marks and that
none of the Stockholders or any of their Affiliates will contest
the ownership or validity of any rights of the Purchaser, the
Company or any Subsidiary in or to the Company Marks.
(b) From and after the Closing, none of the
Stockholders or any of their Affiliates shall use any of the
Owned Intellectual Property or any of the Licensed Intellectual Property.
(c) From the date hereof to the Closing, none of the Stockholders,
the Company or any Subsidiary shall, without the permission of Purchaser (i)
sell, assign, or grant any security interest in or to any item of the Owned
Intellectual Property, Licensed Intellectual Property or Licenses, (ii) grant to
any
third party any license with respect to any Owned Intellectual Property or
Licensed Intellectual Property, other than licenses
of Company Software to the customers of the Business in the
ordinary course of business, (iii) develop, create or invent any Intellectual
Property jointly with any third party, or (iv)
disclose, or allow to be disclosed, any confidential Owned Intellectual
Property, unless such Owned Intellectual Property is subject to a
confidentiality or nondisclosure covenant protecting against disclosure thereof.
(d) From the date hereof to the Closing, the Company
shall perform all applicable filings, recordings and other acts,
and pay all required fees and taxes, to maintain and protect its interest in
each and every item of Owned Intellectual Property
and Licensed Intellectual Property.
SECTION 5.07. Non-Competition. (a) In partial consideration of the
payments made
to the Stockholders under this Agreement, the Stockholders agree
that, for a period of five years after the Closing (the
"Restricted Period"), the Stockholders shall not engage, directly
or indirectly, in any business anywhere in the world that manufactures, produces
or supplies products or services of the
kind manufactured, produced or supplied by the Purchaser, the Business, the
Company or any Subsidiary as of the Closing Date
or, without the prior written consent of the Purchaser, directly
or indirectly, own an interest in, manage, operate, join,
control, lend money or render financial or other assistance to or participate in
or be connected with, as an officer, employee,
partner, stockholder, consultant or otherwise, any Person that competes with the
Purchaser, the Business, the Company or any Subsidiary in manufacturing,
producing or supplying products or services of the kind manufactured, produced
or supplied by the Purchaser, the Business, the Company or any Subsidiary as of
the Closing Date; provided, however, that, for the purposes of this Section
5.07, ownership of securities having no more than one
percent of the outstanding voting power of any entity that
competes either directly or indirectly, with the Purchaser, the Business, the
Company or any Subsidiary which are listed on any national securities exchange
or traded actively in the national over-the-counter market shall not be deemed
to be in violation of
this Section 5.07 as long as the Person owning such securities
has no other connection or relationship with such entity.
(b) As a separate and independent covenant, each Stockholder agrees
with the Purchaser that, for the Restricted
Period, such Stockholder will not in any way, directly or
indirectly, for the purpose of conducting or engaging in any
business that manufactures, produces or supplies products or
services of the kind manufactured, produced or supplied by the Business, the
Company or any Subsidiary as of the Closing, call
upon, solicit, advise or otherwise do, or attempt to do, business competitive
with the Business with any customers of the Business,
the Company or any Subsidiary with whom the Business, the Company
or any Subsidiary had any dealings during the period of time in
which the Company was an Affiliate of such Stockholder or take
away or interfere or attempt to interfere with any custom, trade, business or
patronage of the Business, the Company or any
Subsidiary, or interfere with or attempt to interfere with any officers,
employees, representatives or agents of the Business,
the Company or any Subsidiary, or induce or attempt to induce any
of them to leave the employ of the Company or any Subsidiary or violate the
terms of their contracts, or any employment
arrangements, with the Company or any Subsidiary.
(c) The Restricted Period shall be extended by the
length of any period during which any Stockholder is in breach of
the terms of this Section 5.07.
(d) The purchase price for the covenants of this
Section 5.07 shall be $8,650,000 (the "Non-Compete Purchase
Price"), allocated among the Stockholders as set forth in Exhibit 5.07. On the
date of each installment payment set forth in
Exhibit 2.04 (or, if such date does not fall on a Business Day,
the first Business Day following such date), the Purchaser shall
pay to each Stockholder such Stockholder's installment of the Non-Compete
Purchase Price as set forth in Exhibit 5.07. With
respect to each Stockholder, the payments shall be made by wire transfer in
immediately available funds to the Purchase Price
Bank Account or such other account designated by such Stockholder
in writing to the Purchaser at least five Business Days prior to
the date on which such payment is due. The parties hereto
acknowledge that the Purchaser's obligations to make payments
pursuant to this Section 5.07(d) terminate following the final installment
payment required pursuant to Exhibit 5.07.
(e) The parties hereto acknowledge that the
obligations of Section 5.07(a) and 5.07(b) shall not apply with respect to the
Stockholders ownership and operation of SDC, in a manner consistent with past
practice, during the Exempt Term.
(f) Each Stockholder acknowledges that the covenants
of such Stockholder set forth in this Section 5.07 are an
essential element of this Agreement and that, but for the
agreement of such Stockholder to comply with these covenants, the Purchaser
would not have entered into this Agreement. Each Stockholder acknowledges that
this Section 5.07 constitutes an independent covenant and shall not be affected
by performance or nonperformance of any other provision of this Agreement by the
Purchaser. Each Stockholder has independently consulted with his
or her counsel and after such consultation agrees that the
covenants set forth in this Section 5.07 are reasonable and
proper.
(g) The parties hereto recognize that the laws and
public policies of various jurisdictions may differ as to the
validity and enforceability of covenants similar to those set
forth in this Section 5.07. It is the intention of the parties
that the provisions in this Section 5.07 be enforced to the
fullest extent permissible under the laws and policies of each jurisdiction in
which enforcement may be sought, and that the unenforceability (or the
modification to conform to such laws or policies) of any provisions in this
Section 5.07 shall not render unenforceable, or impair, the remainder of the
provisions hereof. Accordingly, if at the time of enforcement of any provision
hereof, a court of competent jurisdiction holds that the
restrictions stated in this Section 5.07 are unreasonable under circumstances
then existing, the parties hereto agree that the
maximum period, scope, or geographic area reasonable under such circumstances
will be substituted for the stated period, scope or geographical area and that
such court shall be allowed to revise
the restrictions contained in this Section 5.07 to cover the
maximum period, scope and geographical area permitted by law.
SECTION 5.08. Release of Indemnity Obligations. The Stockholders covenant
and agree, on or prior to
the Closing, to execute and deliver to the Company, for the
benefit of the Company and each Subsidiary, a general release and discharge, in
form and substance satisfactory to the Purchaser, releasing and discharging the
Company and each Subsidiary from
any and all obligations to indemnify the Stockholders or
otherwise hold them harmless pursuant to any agreement or other arrangement
entered into prior to the Closing.
SECTION 5.09. Transfer of SDC. Prior to the Closing, the Company and the
Stockholders covenant and agree to transfer all of the
outstanding capital stock of SDC to the Stockholders on terms reasonably
acceptable to the Purchaser (which terms shall include
an assignment of the SDC Lease to SDC and an agreement to
discontinue the use of the name "Delco" and all similar or
related names, marks and logos). Within six months after the
Closing Date (the "Exempt Term"), the Stockholders covenant and
agree to sell, transfer or otherwise dispose of SDC to a third
party unaffiliated with the Stockholders. If, at the expiration
of the Exempt Term, the Stockholders have not sold, transferred
or otherwise disposed of SDC, the Stockholders covenant and agree
to liquidate SDC. The Purchaser covenants and agrees that,
during the Exempt Term, the Purchaser shall cause the Company to continue to
provide financial and accounting services to SDC on
terms consistent with past practice.
SECTION 5.10. Guarantee. The Purchaser shall use reasonable efforts to
obtain
a release for Perry Delman from his guarantee of the Company's obligations under
the Company's credit agreement with The Chase Manhattan Bank and European
American Bank dated as of August 12,
1999; provided that the Purchaser shall not be required to pay
any money in connection with such release or to substitute itself
as guarantor.
SECTION 5.11. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do
or cause to be done all things necessary, proper or advisable
under applicable Law, and execute and deliver such documents and
other papers, as may be required to carry out the provisions of
this Agreement and consummate and make effective the transactions contemplated
by this Agreement.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Phantom Shares. Prior to the Closing, the Company shall take
all
action appropriate and necessary to cash out each outstanding
phantom stock unit award issued under the Phantom Stock Plan (the "Phantom Stock
Award") in accordance with the terms of the
Phantom Stock Plan. The Company agrees that it shall not grant
or award or cause to be granted or awarded any Phantom Stock
Award from the date hereof and the Company further agrees that it shall take all
action that is appropriate and necessary prior to
the Closing Date (i) to terminate the Phantom Stock Plan,
effective as of the day before the Closing Date, and (ii) to
obtain a release of all claims on behalf of all holders of
Phantom Share Awards on terms reasonably satisfactory to the Purchaser.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity. (a) The Stockholders agree to indemnify and hold
harmless the Purchaser, the Company and each Subsidiary against
the following Taxes and, except as otherwise provided in Section
7.04, against any loss, damage, liability or expense, including reasonable fees
for attorneys and other outside consultants,
incurred in contesting or otherwise in connection with any such
Taxes: (i) Taxes imposed on the Company or any Subsidiary with respect to
taxable periods ending on or before the Closing Date;
(ii) with respect to taxable periods beginning before the Closing
Date and ending after the Closing Date, Taxes imposed on the
Company or any Subsidiary which are allocable, pursuant to
Section 7.01(b), to the portion of such period ending on the
Closing Date; (iii) Taxes imposed on the Stockholders or imposed
on any member of any affiliated group with which any of the
Company and the Subsidiaries file or have filed a Return on a consolidated or
combined basis for a taxable period ending on or before the Closing Date; and
(iv) Taxes imposed on the Purchaser,
the Company or any Subsidiary as a result of any breach of
warranty or misrepresentation under Section 3.29.
(b) In the case of Taxes that are payable with respect
to a taxable period that begins before the Closing Date and ends
after the Closing Date, the portion of any such Tax that is
allocable to the portion of the period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (x) based
upon or related to income or receipts, or (y) imposed in connection with
any sale or other transfer or assignment of property (real or personal,
tangible or intangible) (other
than conveyances pursuant to this Agreement, as provided
under Section 7.07), deemed equal to the amount which would
be payable if the taxable year ended with the Closing Date;
and
(ii) in the case of Taxes imposed on a periodic basis
with respect to the assets of the Company or any Subsidiary,
or otherwise measured by the level of any item, deemed to be
the amount of such Taxes for the entire period (or, in the
case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period), multiplied by a
fraction the numerator of which is the
number of calendar days in the period ending on the Closing
Date and the denominator of which is the number of calendar
days in the entire period.
SECTION 7.02. Returns and Payments. (a) From the date of this Agreement
through and
after the Closing Date, the Stockholders shall prepare and file
or otherwise furnish in proper form to the appropriate
Governmental Authority (or cause to be prepared and filed or so furnished) in a
timely manner all Tax returns, reports and forms ("Returns") relating to the
Company and the Subsidiaries that are
due on or before or relate to any taxable period ending on or
before the Closing Date (and the Purchaser shall do the same with respect to any
taxable period ending after the Closing Date).
Returns of the Company and the Subsidiaries not yet filed for any taxable period
that begins before the Closing Date shall be
prepared in a manner consistent with past practices employed with respect to the
Company and the Subsidiaries (except to the extent counsel for the Stockholders
or the Company render a legal
opinion that there is no reasonable basis in law therefor or determines that a
Return cannot be so prepared and filed without
being subject to penalties). With respect to any Return required
to be filed by the Purchaser or the Stockholders with respect to
the Company and the Subsidiaries and as to which an amount of Tax
is allocable to the other party under Section 7.01(b), the filing party shall
provide the other party and its authorized
representatives with a copy of such completed Return and a
statement certifying the amount of Tax shown on such Return that
is allocable to such other party pursuant to Section 7.01(b),
together with appropriate supporting information and schedules at least 20
Business Days prior to the due date (including any
extension thereof) for the filing of such Return, and such other
party and its authorized representatives shall have the right to review and
comment on such Return and statement prior the filing
of such Return.
(b) The Stockholders shall pay or cause to be paid
when due and payable all Taxes with respect to the Company and
the Subsidiaries for any taxable period ending on or before the Closing Date and
the Purchaser shall so pay or cause to be paid
Taxes for any taxable period after the Closing Date (subject to
its right of indemnification from the Stockholders by the date
set forth in Section 7.04 for Taxes attributable to the portion
of any Tax period that includes the Closing Date pursuant to
Sections 7.01(a) and 7.01(b)).
SECTION 7.03. Contests. (a) After the Closing, the Purchaser shall
promptly notify the Stockholder Representative in writing of any written
notice of a proposed assessment or claim in an audit or
administrative or judicial proceeding of the Purchaser or of any
of the Company and the Subsidiaries which, if determined
adversely to the taxpayer, would be grounds for indemnification
under this Article VII; provided, however, that a failure to give
such notice will not affect the Purchaser's right to
indemnification under this Article VII except to the extent, if
any, that, but for such failure, the Stockholders could have
avoided all or a portion of the Tax liability in question.
(b) In the case of an audit or administrative or
judicial proceeding that relates to periods ending on or before
the Closing Date, provided that the Stockholders acknowledge in writing their
liability under this Agreement to hold the
Purchaser, the Company and the Subsidiaries harmless against the
full amount of any adjustment which may be made as a result of
such audit or proceeding that relates to periods ending on or
before the Closing Date (or, in the case of any taxable year that includes the
Closing Date, against an adjustment allocable under Section 7.01(b) to the
portion of such year ending on or before
the Closing Date), the Stockholder Representative shall have the
right at the Stockholders' expense to participate in and control
the conduct of such audit or proceeding but only to the extent
that such audit or proceeding relates solely to a potential
adjustment for which the Stockholders have acknowledged their liability; the
Purchaser also may participate in any such audit
or proceeding and, if the Stockholder Representative does not
assume the defense of any such audit or proceeding, the Purchaser
may defend the same in such manner as it may deem appropriate, including, but
not limited to, settling such audit or proceeding
after giving five days' prior written notice to the Stockholder Representative
setting forth the terms and conditions of
settlement. In the event that issues relating to a potential adjustment for
which the Stockholders have acknowledged their liability are required to be
dealt with in the same proceeding as separate issues relating to a potential
adjustment for which the Purchaser would be liable, the Purchaser shall have the
right, at
its expense, to control the audit or proceeding with respect to
the latter issues.
(c) With respect to issues relating to a potential adjustment for
which both the Stockholders (as evidenced by its acknowledgment under this
Section 7.03) and the Purchaser, the
Company or any Subsidiary could be liable, (i) both the Purchaser
and the Stockholder Representative may participate in the audit
or proceeding, and (ii) the audit or proceeding shall be
controlled by that party which would bear the burden of the
greater portion of the sum of the adjustment and any
corresponding adjustments that may reasonably be anticipated for future Tax
periods. The principle set forth in the immediately preceding sentence shall
govern also for purposes of deciding any issue that must be decided jointly
(including, without
limitation, choice of judicial forum) in situations in which
separate issues are otherwise controlled under this Article VII
by the Purchaser and the Stockholder Representative.
(d) Neither the Stockholders nor the Stockholder Representative shall
enter into any compromise or agree to settle
any claim pursuant to any Tax audit or proceeding that would
adversely affect the Purchaser for such year or a subsequent year without the
written consent of the Purchaser, which consent may
not be unreasonably withheld. The Purchaser shall not enter into
any compromise or agree to settle any claim pursuant to any Tax
audit or proceeding that would adversely affect any Stockholder
for such year or a subsequent year without the written consent of
the Stockholder Representative, which consent may not be
unreasonably withheld. The Purchaser and the Stockholders
(including the Stockholder Representative) agree to cooperate,
and the Purchaser agrees to cause the Company and the
Subsidiaries to cooperate, in the defense against or compromise
of any claim in any audit or proceeding.
SECTION 7.04. Time of Payment. Payment by the Stockholders of any amounts
due under
this Article VII in respect of Taxes shall be made (i) at least
three Business Days before the due date of the applicable
estimated or final Return required to be filed by the Purchaser
on which is required to be reported income for a period ending
after the Closing Date for which the Stockholders are responsible under Sections
7.01(a) and 7.01(b) without regard to whether the Return shows overall net
income or loss for such period, and
(ii) within three Business Days following an agreement between
the Stockholder Representative and the Purchaser that an
indemnity amount is payable, an assessment of a Tax by a taxing authority, or a
"determination" as defined in Section 1313(a) of
the Code. If liability under this Article VII is in respect of
costs or expenses other than Taxes, payment by the Stockholders
of any amounts due under this Article VII shall be made within
five Business Days after the date when the Stockholder
Representative has been notified by the Purchaser that the Stockholders have a
liability for a determinable amount under
this Article VII and is provided with calculations or other
materials supporting such liability.
SECTION 7.05. Cooperation and Exchange of Information. The Stockholders
and the Purchaser will provide each other with such cooperation and information
as either of them reasonably may request of the other in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or
a right to a refund of Taxes, participating in or conducting any
audit or other proceeding in respect of Taxes or making representations to or
furnishing information to parties
subsequently desiring to purchase any of the Company or the Subsidiaries or any
part of the Business from the Purchaser.
Such cooperation and information shall include providing copies
of relevant Returns or portions thereof, together with
accompanying schedules, related work papers and documents
relating to rulings or other determinations by Tax authorities.
The Stockholders shall make their employees available on a basis mutually
convenient to both parties to provide explanations of
any documents or information provided hereunder. Each of the Stockholders and
the Purchaser shall retain all Returns,
schedules and work papers, records and other documents in their possession
relating to Tax matters of the Company and the
Subsidiaries for each taxable period first ending after the
Closing Date and for all prior taxable periods until the later of
(i) the expiration of the statute of limitations of the taxable periods to which
such Returns and other documents relate, without regard to extensions except to
the extent notified by the other
party in writing of such extensions for the respective Tax
periods, or (ii) six years following the due date (without
extension) for such Returns. Any information obtained under this Section 7.05
shall be kept confidential except as may be
otherwise necessary in connection with the filing of Returns or
claims for refund or in conducting an audit or other proceeding.
SECTION 7.06. Conveyance Taxes. The Stockholders shall be liable for and
shall hold
the Purchaser harmless against any real property transfer or
gains, sales, use, transfer, value added, stock transfer, and
stamp taxes, any transfer, recording, registration, and other
fees, and any similar Taxes which become payable in connection
with the transactions contemplated by this Agreement. The Stockholders, after
the review and consent by the Purchaser,
shall file such applications and documents as shall permit any
such Tax to be assessed and paid on or prior to the Closing Date
in accordance with any available pre-sale filing procedure. The Purchaser shall
execute and deliver all instruments and
certificates necessary to enable the Stockholders to comply with
the foregoing.
SECTION 7.07. Miscellaneous. (a) Any tax sharing, tax allocation or
similar
agreement or arrangement between the Stockholders and the Company
or any Subsidiary shall be terminated immediately prior to the Closing.
(b) Notwithstanding any provision in this Agreement to
the contrary, the obligations of the Stockholders to indemnify
and hold harmless the Purchaser, the Company and the Subsidiaries pursuant to
this Article VII, and the representations and
warranties contained in Section 3.29, shall terminate at the
close of business on the 120th day following the expiration of
the applicable statute of limitations with respect to the Tax Liabilities in
question (giving effect to any waiver, mitigation
or extension thereof).
(c) From and after the date of this Agreement, the Stockholders shall
not without the prior written consent of the Purchaser (which may, in its sole
and absolute discretion,
withhold such consent) make, revoke or change, or cause or permit
to be made, revoked or changed, any express or deemed Tax
election or method of Tax accounting that would affect the
Company or any Subsidiary or settle or compromise any liability
with respect to Taxes of the Company or any Subsidiary.
(d) The Purchaser shall be entitled to recover
professional fees and related costs that it may reasonably incur
to enforce the provisions of this Article VII.
(e) All payments made by any party hereto to or for
the benefit of any other party hereto under this Article VII or
under Article IX (i) shall be made net of Tax benefits actually realized by the
indemnified party in respect of the claim giving
rise to the indemnity payment and (ii) shall be treated as
adjustments to the Purchase Price or as capital contributions for
Tax purposes and such treatment shall govern for purposes hereof except to the
extent that the Laws of a particular jurisdiction provide otherwise, in which
case such payments shall be made in
an amount sufficient to indemnify the relevant party on an after-
Tax basis.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Company and the
Stockholders. The obligations of the Company and each Stockholder
to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Purchaser contained in
this Agreement that are qualified as to materiality shall be
true and correct, and those not so qualified shall be true
and correct in all material respects as of the date hereof
and as of the Closing, with the same force and effect as if
made as of the Closing Date (other than such representations
and warranties that are made as of another date, which shall
be true and correct as of such date), the covenants and agreements
contained in this Agreement to be complied with
by the Purchaser on or before the Closing Date shall have
been complied with in all material respects, and the
Stockholders shall have received a certificate from the
Purchaser to such effect signed by a duly authorized officer thereof;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Shares contemplated hereby
shall have expired or shall have
been terminated;
(c) No Proceeding or Litigation. No Action shall have
been commenced by or before any Governmental Authority
against the Company, the Purchaser or any Stockholder,
seeking to restrain or materially and adversely alter the transactions
contemplated by this Agreement which, in the reasonable, good faith
determination of the Stockholders, is likely to render impossible or
unlawful the consummation of
such transactions; provided, however, that the provisions of
this Section 8.01(c) shall not apply if the Company or any Stockholder has
directly or indirectly solicited or
encouraged any such Action;
(d) Resolutions. The Stockholders shall have received
a true and complete copy, certified by the Secretary or an Assistant
Secretary of the Purchaser, of the resolutions
duly and validly adopted by the Board of Directors of the Purchaser
evidencing its authorization of the execution and delivery of this
Agreement and the Ancillary Agreements to
which it is a party and the consummation of the transactions contemplated
hereby and thereby;
(e) Incumbency Certificate. The Stockholders shall
have received a certificate of the Secretary or an Assistant Secretary of
the Purchaser certifying the names and
signatures of the officers of the Purchaser authorized to
sign this Agreement and the Ancillary Agreements and the
other documents to be delivered hereunder and thereunder;
(f) Legal Opinion. The Stockholders shall have
received from Catherine Suttmeier, General Counsel to the Purchaser, a
legal opinion, addressed to the Stockholders
and dated the Closing Date, covering matters reasonably
requested by the Stockholders;
(g) Ancillary Agreements. Each Ancillary Agreement
shall be in full force and effect; provided, however, that
the provisions of this Section 8.01(g) shall not apply if
the failure of any Ancillary Agreement to be in full force
and effect is attributable to any act or failure to act by
the Company or any Stockholder.
SECTION 8.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to
the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The representations
and warranties of the Company and the Stockholders contained in this
Agreement that are qualified
as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material
respects as of the date hereof and as of the Closing, with
the same force and effect as if made as of the Closing Date (other than
such representations and warranties that are
made as of another date, which shall be true and correct as
of such date), the covenants and agreements contained in
this Agreement to be complied with by the Company and the Stockholders on
or before the Closing Date shall have been complied with in all material
respects, and the Purchaser
shall have received a certificate of the Company and the Stockholders to
such effect signed, in the case of the
Company, by a duly authorized officer thereof and by each Stockholder;
(b) HSR Act. Any waiting period (and any extension thereof) under
the HSR Act applicable to the purchase of the Shares contemplated hereby
shall have expired or shall have
been terminated;
(c) No Proceeding or Litigation. No Action shall have
been commenced or threatened by or before any Governmental Authority
against the Company, the Purchaser or any
Stockholder, seeking to restrain or materially and adversely alter the
transactions contemplated hereby which the
Purchaser believes, in its sole and absolute discretion, is likely to
render impossible or unlawful the consummation of
the transactions contemplated by this Agreement or which
could have a Material Adverse Effect or otherwise render inadvisable, in
the sole and absolute discretion of the Purchaser, the consummation of the
transactions contemplated
by this Agreement; provided, however, that the provisions of
this Section 8.02(c) shall not apply if the Purchaser has solicited or
encouraged any such Action;
(d) Resolutions of the Company. The Purchaser shall
have received a true and complete copy, certified by the Secretary or an
Assistant Secretary of the Company, of the resolutions duly and validly
adopted by the Board of
Directors of the Company and the Stockholders evidencing
their authorization of the execution and delivery of this Agreement and the
Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby;
(e) Incumbency Certificate of the Company. The
Purchaser shall have received a certificate of the Secretary
or an Assistant Secretary of the Company certifying the
names and signatures of the officers of the Company
authorized to sign this Agreement and the Ancillary
Agreements and the other documents to be delivered hereunder
and thereunder;
(f) Legal Opinion. The Purchaser shall have
received from Salon, Marrow, Dyckman & Newman, LLP a legal opinion,
addressed to the Purchaser and dated the Closing
Date, covering matters reasonably requested by the
Purchaser;
(g) Consents and Approvals. The Purchaser, the
Company, and the Stockholders shall have received, each in
form and substance satisfactory to the Purchaser in its sole
and absolute discretion, all authorizations, consents,
orders and approvals of all Governmental Authorities and officials and all
third party consents and estoppel
certificates which the Purchaser in its sole and absolute discretion deems
necessary or desirable for the consummation
of the transactions contemplated by this Agreement and the Ancillary
Agreements, including, without limitation, all
consents set forth in Section 3.06 of the Disclosure
Schedule and all third party consents required under any
Material Contracts;
(h) Organizational Documents. The Purchaser shall
have received a copy of (i) the Certificate of
Incorporation, as amended (or similar organizational
documents), of the Company and of each Subsidiary, certified
by the secretary of state of the jurisdiction in which each
such entity is incorporated or organized, as of a date not earlier than
five Business Days prior to the Closing Date
and accompanied by a certificate of the Secretary or
Assistant Secretary of each such entity, dated as of the
Closing Date, stating that no amendments have been made to
such Certificate of Incorporation (or similar organizational documents)
since such date, and (ii) the By-laws (or similar organizational documents)
of the Company and of each
Subsidiary, certified by the Secretary or Assistant
Secretary of each such entity;
(i) Minute Books. The Purchaser shall have received a
copy of the minute books and stock register of the Company
and each Subsidiary, certified by their respective
Secretaries or Assistant Secretaries as of the Closing Date;
(j) FIRPTA. The Stockholders shall have delivered to
the Purchaser a statement from the Company (in a form
reasonably satisfactory to the Purchaser) pursuant to
Treasury regulation section 1.897-2(h), certifying that the Shares are not
a United States real property interest within
the meaning of section 897 of the Code;
(k) Good Standing; Qualification to Do Business. The Purchaser shall
have received good standing certificates for
the Company and for each Subsidiary from the secretary of
state of the jurisdiction in which each such entity is incorporated or
organized dated as of a date not earlier
than five Business Days prior to the Closing Date and
accompanied by bring-down telegrams dated the Closing Date;
(l) Release of Indemnity Obligations. The Purchaser
shall have received the general release and discharge from
the Stockholders referred to in Section 5.08 in form and substance
satisfactory to the Purchaser in its sole and
absolute discretion;
(m) Due Diligence. The Purchaser shall have completed
all its business, legal, accounting and environmental due diligence with
respect to the Business, the Company and the Subsidiaries and shall, in its
sole and absolute judgment,
be satisfied with the results thereof;
(n) No Material Adverse Effect. No event or events
shall have occurred, or be reasonably likely to occur,
which, individually or in the aggregate, have, or could
have, a Material Adverse Effect;
(o) Stockholders' Agreement. The Purchaser shall have received, in
form reasonably satisfactory to the Purchaser,
a termination and release of the Stockholders' Agreement
executed by the Stockholders; and
(p) Ancillary Agreements. Each Ancillary Agreement
shall be in full force and effect; provided, however, that
the provisions of this Section 8.02(p) shall not apply if
the failure of any Ancillary Agreement to be in full force
and effect is attributable to any act or failure to act by
the Purchaser.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties. The
representations and warranties of the parties
hereto contained in this Agreement and the Ancillary Agreements,
and all statements contained in the Acquisition Documents, shall survive the
Closing until two years following the Closing Date; provided, however, that (a)
the representations and warranties
made pursuant to Sections 3.01, 3.02, 3.03, 3.04, 3.33, 4.01 and
4.06 shall survive indefinitely, (b) the representations and warranties dealing
with Tax matters shall survive as provided in Section 7.07(b) and (c) insofar as
any claim is made by the
Purchaser for the breach of any representation or warranty of the Company or any
Stockholder contained herein, which claim arises
out of allegations of personal injury or property damage suffered
by any third party on or prior to the Closing Date or
attributable to products or Inventory sold or shipped, or
activities or omissions that occur, on or prior to the Closing
Date, such representations and warranties shall, for purposes of
such claim by the Purchaser, survive until thirty calendar days
after the expiration of the applicable statute of limitations governing such
claims. Neither the period of survival nor the liability of any Stockholder
with respect to the representations
and warranties of the Company or any Stockholder shall be reduced
by any investigation made at any time by or on behalf of the Purchaser. If
written notice of a claim has been given prior to
the expiration of the applicable representations and warranties
by the Purchaser to the Stockholder Representative, then the
relevant representations and warranties shall survive as to such claim, until
such claim has been finally resolved.
SECTION 9.02. Indemnification by the Stockholders. (a) The Purchaser and
its Affiliates, officers, directors, employees, agents, successors and assigns
(each an "Indemnified Party") shall be indemnified and held harmless by
the Stockholders, jointly and severally, for and against any and
all Liabilities, losses, diminution in value, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, attorneys' and consultants' fees
and expenses) actually suffered or incurred by them (including, without
limitation, any Action brought or otherwise initiated by
any of them) (hereinafter a "Loss"), arising out of or resulting
from:
(i) the breach of any representation or warranty made
by the Company or any Stockholder contained in this
Agreement or the Ancillary Agreements; or
(ii) the breach of any covenant or agreement by the
Company or any Stockholder contained in this Agreement or
the Ancillary Agreements; or
(iii) Liabilities of the Company or any Subsidiary
not reflected on the Reference Balance Sheet, whether
arising before or after the Closing Date, arising from or relating to the
ownership or actions or inactions of the
Company or such Subsidiary or the conduct of the Business
prior to the Closing; or
(iv) any and all Losses suffered or incurred by the Purchaser, the
Company or any Subsidiary by reason of or in connection with any claim or
cause of action of any third
party to the extent arising out of any action, inaction,
event, condition, liability or obligation of the Company or
any Stockholder occurring or existing prior to the Closing;
or
(v) the excess of the amounts payable by the Purchaser following the
Closing Date that relate to service by any
employee of the Company through to the Closing Date.
To the extent that the Stockholders' undertakings set forth in
this Section 9.02 may be unenforceable, each Stockholder shall contribute the
maximum amount that he or she is permitted to contribute under applicable Law to
the payment and satisfaction
of all Losses incurred by the Purchaser, the Company and the Subsidiaries.
(b) An Indemnified Party shall give the Stockholder Representative
notice of any matter which an Indemnified Party
has determined has given or could give rise to a right of indemnification under
this Agreement, within 60 days of such determination, stating the amount of the
Loss, if known, and
method of computation thereof, and containing a reference to the provisions of
this Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and
Liabilities of the Stockholders under this Article IX with
respect to Losses arising from claims of any third party which
are subject to the indemnification provided for in this Article
IX ("Third Party Claims") shall be governed by and contingent
upon the following additional terms and conditions: if an
Indemnified Party shall receive notice of any Third Party Claim,
the Indemnified Party shall give the Stockholder Representative
notice of such Third Party Claim within 30 days of the receipt by
the Indemnified Party of such notice; provided, however, that the failure to
provide such notice shall not release the Stockholders
from any of its obligations under this Article IX except to the
extent that the Stockholders are materially prejudiced by such
failure and shall not relieve the Stockholders from any other obligation or
Liability that they may have to any Indemnified
Party otherwise than under this Article IX. If the Stockholder Representative
acknowledges in writing the Stockholders'
obligation to indemnify the Indemnified Party hereunder against
any Losses that may result from such Third Party Claim, then the Stockholder
Representative shall be entitled to assume and
control the defense of such Third Party Claim at the
Stockholders' expense and through counsel of its choice if it
gives notice of its intention to do so to the Indemnified Party
within five days of the receipt of such notice from the
Indemnified Party; provided, however, that if there exists or is reasonably
likely to exist a conflict of interest that would make
it inappropriate in the judgment of the Indemnified Party in its
sole and absolute discretion, for the same counsel to represent
both the Indemnified Party and the Stockholders, then the
Indemnified Party shall be entitled to retain its own counsel, in
each jurisdiction for which the Indemnified Party determines
counsel is required, at the expense of the Stockholders. In the
event that the Stockholder Representative exercises the right to undertake any
such defense against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Stockholder Representative in such
defense and make available to
the Stockholder Representative, at the Stockholders' expense, all witnesses,
pertinent records, materials and information in the Indemnified Party's
possession or under the Indemnified Party's control relating thereto as is
reasonably required by the
Stockholder Representative. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the Stockholder Representative shall
cooperate with the Indemnified Party in such defense and make available to the
Indemnified Party, at the Stockholders' expense, all such witnesses, records,
materials and information in the Stockholders' possession or under the
Stockholders' control relating thereto as is reasonably required
by the Indemnified Party. No such Third Party Claim may be
settled by the Stockholder Representative or the Stockholders
without the prior written consent of the Indemnified Party.
(c) No claim may be made against the Stockholders for indemnification
pursuant to Section 9.02(a)(i) unless the
aggregate of all Losses of the Indemnified Parties with respect
to Section 9.02(a)(i) shall exceed an amount equal to $100,000,
in which case the Stockholders shall be liable for all of such
Loss (subject to Section 9.02(d)).
(d) The maximum amount of indemnifiable Losses that
may be recovered from the Stockholders arising out of this
Agreement shall be equal to $15,000,000.
SECTION 9.03. Distributions from Indemnity Escrow Fund. In the event that
(a) the Stockholder Representative shall not have objected to the amount claimed
by the Purchaser
for indemnification with respect to any Loss or (b) the
Stockholder Representative shall have delivered notice of its disagreement as to
the amount of any indemnification requested by
the Purchaser and either (i) the Stockholder Representative and
the Purchaser shall have, subsequent to the giving of such
notice, mutually agreed that the Stockholders are obligated to indemnify the
Purchaser for a specified amount and shall have so jointly notified the Escrow
Agent or (ii) a final nonappealable judgment shall have been rendered by the
court having
jurisdiction over the matters relating to such claim by the
Purchaser for indemnification from Stockholders and the Escrow
Agent shall have received, in the case of clause (i) above,
written instructions from the Stockholder Representative and the Purchaser or,
in the case of clause (ii) above, a copy of the
final nonappealable judgment of the court, the Escrow Agent shall deliver to the
Purchaser from the Indemnity Escrow Fund any
amount determined to be owed to the Purchaser under this Article
IX in accordance with the Escrow Agreement.
SECTION 9.04. Tax Matters. Anything in this Article IX (except for the
specific reference to Tax matters in Section 9.01) to the contrary
notwithstanding, the rights and obligations of the parties with respect to
indemnification for any and all Tax matters shall be governed by Article VII.
SECTION 9.05. Appointment of Stockholder Representative. (a) The
Stockholders do hereby constitute and
appoint Robert Delman (and each successor appointed in accordance
with Section 9.05(c) of this Agreement) (the "Stockholder Representative") the
agent and true and lawful attorney-in-fact
of them and each of them, in the name, place and stead of them
and each of them, in connection with and to facilitate the consummation of the
transactions contemplated by this Agreement,
and in connection with the performance of the various actions
required or permitted to be performed on behalf of the
Stockholders under this Agreement, which shall include the
following purposes and with the following powers, all of which
shall be exercised by the Stockholder Representative to the same extent as if
the Stockholders themselves were acting, and Robert Delman (and any successor)
hereby accepts such appointment and
agrees to use his or her best efforts to exercise such powers in accordance with
the terms hereof:
(i) to agree to, and to execute and deliver, such agreements,
documents and instruments as the Stockholder Representative, in his or her
sole discretion, may deem
necessary and advisable, and act for and on behalf of each
of the Stockholders, in each case solely in connection with
the matters set forth in this Agreement;
(ii) to receive and hold in trust, in a segregated
account or accounts established for the benefit of the Stockholders, any
sums of money paid or to be paid by the Purchaser pursuant to this
Agreement, including, without limitation, the Purchase Price, distributions
from the
escrow pursuant to the Escrow Agreement and any other
amounts payable to the Stockholder Representative under this Agreement on
behalf of the Stockholders (the "Payments"),
and to promptly apply such Payments for the payment of any
sums due or to become due to the Stockholders from the
Purchaser by virtue of the terms of this Agreement in
accordance with the respective interests of the
Stockholders;
(iii) to exercise any and all rights granted to the Stockholder
Representative on behalf of the Stockholders
under the terms of this Agreement, the Ancillary Agreements
and any and all collateral documents delivered by the
Purchaser or any other Person, firm or corporation during
the term of this Agreement;
(iv) either in his or her own name as Stockholder Representative or as
attorney-in-fact for the Stockholders,
or in any one or more capacities, to enforce and protect the rights and
interests of the Stockholders and/or the
Stockholder Representative arising out of or under or in any manner
relating to this Agreement, including, in connection therewith, to (A)
assert any claim or institute any action
or proceeding, including without limitation, suits against
the Purchaser arising out of this Agreement; (B)
investigate, defend, contest or litigate any claim, action, proceeding or
investigation initiated by the Purchaser or
any other Person, firm or corporation or by any federal,
state or local governmental or regulatory authority, against
the Stockholder Representative and/or any of the
Stockholders in any such claim, action, proceeding or investigation; (C)
file any proofs of debt, claims and
petitions as he or she, in his or her sole discretion, may
deem advisable or necessary; (D) file and prosecute appeals
from any decision, judgment or award rendered in any such
claims, action, proceeding or investigation; and (E) with
the prior written consent of the Stockholders (which consent shall not be
unreasonably withheld), compromise or settle on
such terms as he or she shall determine to be appropriate,
and give receipts, releases and discharges with respect to,
and direct the Purchaser to make payments with respect to,
any such claim, action, proceeding or investigation; it
being understood that the Stockholder Representative shall
not have any obligation to take any such actions described
in the foregoing clauses (A) through (E) and no such failure
to act on the part of the Stockholder Representative shall
be deemed a waiver of any such right or interest by the Stockholder
Representative or the Stockholders to take any
such actions unless such waiver is in writing signed by the waiving party;
(v) to modify, extend, change or waive any of the
terms, provisions and conditions of this Agreement, the
Escrow Agreement or any other Ancillary Agreement, and any
other agreements hereafter executed or instruments hereafter delivered in
connection therewith; and, in connection
therewith, to execute, deliver and file any and all
documents or instruments on behalf of the Stockholders to
give effect to any such modification, extension, change or waiver; and
(vi) to make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts,
endorsements, notices, requests, instructions, certificates, stock powers,
letters and other writings, and, in general,
to do any and all things and to take any and all action that
he or she in his or her sole and absolute discretion, may consider
necessary or proper, in each case solely in
connection with or to carry out the transactions
contemplated by this Agreement; provided, however, that with respect to
this Section 9.05(a), he or she shall not have
the right to, and agrees that he or she will not, act as or
hold himself or herself out as the representative of the Stockholders for
any purpose other than the purposes
specified in the Agreement.
(b) The grant of authority provided for in Section
9.05(a): (i) is coupled with an interest and shall be
irrevocable and survive the death, incompetency, bankruptcy or liquidation of
any Stockholder; (ii) may be exercised by the Stockholder Representative either
by signing separately as attorney-in-fact for each Stockholder or, after listing
all of
the Stockholders executing an instrument, by the signature of the Stockholder
Representative acting as attorney-in-fact for all of
them; and (iii) shall survive the delivery of an assignment by a Stockholder of
the whole or any fraction of his interest
hereunder.
(c) The Stockholder Representative shall have the
right to resign by notice in writing (the "Resignation Notice"), mailed by
certified mail, return receipt requested, to each of
the Purchaser and the Stockholders as follows:
(i) If a Stockholder Representative shall not have
arranged for a successor or substitute representative or, if
any such successor or substitute representative shall not
have been consented to by the Stockholders, and such
Stockholder Representative shall resign or if such
Stockholder Representative for any reason shall fail or
cease to act as such hereunder or in the event of the commencement of any
proceeding by or against such
Stockholder Representative under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law
now or hereafter in effect or of any proceeding in which a receiver,
liquidator, custodian, trustee or other similar official is sought to be
appointed for such Stockholder Representative, the Stockholders shall, by
majority vote of
the Stockholders, designate and appoint a new representative
or representatives to act hereunder pursuant to the
provisions of Section 9.05(a) hereof.
(ii) A resignation of a Stockholder Representative and appointment of
a successor representative shall become
effective only upon the successor representative's
acceptance of appointment as provided in this Section
9.05(c).
(iii) If a new representative shall act as
successor or substitute representative hereunder, the new representative
shall agree in writing to accept the terms of
this Agreement, subject, if applicable, to any additional
terms to, or different terms from, this Agreement consented
to under Section 9.05(c)(i) and promptly thereafter shall
receive all monies, instruments, collateral security and
other property and records held by his or her predecessors hereunder. No
substitute or successor representative shall
be liable for or obligated to examine the accounts, records
or actions of any predecessor representative.
(iv) Each substitute or successor representative acting hereunder
shall be vested with all of the rights, powers, indemnities and immunities
of the Stockholder Representative initially acting hereunder, and the
Stockholders agree to do
each and every act and thing necessary and appropriate to
vest the same in each such substitute or successor representative.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(f) by the Purchaser if, between the date hereof and
the time scheduled for the Closing: (i) an event or
condition occurs that has resulted in or that may be
expected to result in a Material Adverse Effect or (ii) the Company or any
Subsidiary makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted
by or against the Company or any Subsidiary seeking to
adjudicate any of them a bankrupt or insolvent, or seeking liquidation,
winding-up or reorganization, arrangement, adjustment, protection, relief
or composition of its debts
under any Law relating to bankruptcy, insolvency or reorganization;
(g) by either the Stockholders or the Purchaser if the Closing shall
not have occurred by October 31, 2000;
provided, however, that the right to terminate this
Agreement under this Section 10.01(b) shall not be available
to any party whose failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have resulted in, the
failure of the Closing to occur on or prior
to such date;
(h) by either the Purchaser or the Stockholders in the event that any
Governmental Authority shall have issued an
order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling
or other action shall have become final and nonappealable; or
(i) by the mutual written consent of the Stockholders
and the Purchaser.
SECTION 10.02. Effect of Termination. In the event of termination of this
Agreement as
provided in Section 10.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party hereto except
(i) as set forth in Sections 5.03 and 11.01 and
(ii) that nothing herein shall relieve either party from
liability for any breach of this Agreement.
SECTION 10.03. Waiver. The parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations
and warranties of the other parties hereto contained herein or in
any document delivered by the other parties hereto pursuant
hereto or (c) waive compliance with any of the agreements or conditions
contained herein of the other parties hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. Any waiver of any
term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent
waiver of the same term or condition, or a waiver of any other
term or condition, of this Agreement. The failure of any party
to assert any of its rights hereunder shall not constitute a
waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants,
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such
costs and expenses, whether or not the Closing shall have
occurred.
SECTION 11.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given
or made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 11.02):
(a) if to the Company or the Stockholders:
Delco International Ltd. (Inc.)
19 Harbor Park Drive
Port Washington, New York 11050
Attention: General Counsel
with copies to:
Mr. Robert Delman
112 Wooleys Lane
Great Neck, NY 11023
and
Salon, Marrow, Dyckman & Newman, LLP
685 Third Avenue
New York, NY 10017
Attention: Stephen Feinberg, Esq.
(b) if to the Purchaser:
Oneida Ltd.
163-181 Kenwood Avenue
Oneida, New York 13421
Attention: Catherine H. Suttmeier, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Bonnie Greaves, Esq.
SECTION 11.03. Public Announcements. The parties hereto agree that they
will issue a
press release announcing the execution of this Agreement promptly following such
execution in substantially the form of Exhibit
11.03 hereto. Thereafter, neither the Company and the
Stockholders, on the one hand, nor the Purchaser, on the other
hand, shall make, or cause to be made, any press release or
public announcement in respect of this Agreement or the
transactions contemplated hereby or otherwise communicate with
any news media without prior consultation with the other party or parties,
except as may be required by Law or any stock exchange.
The parties shall cooperate, to the extent practicable, as to the timing and
contents of any such press release or public
announcement.
SECTION 11.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 11.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect for so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 11.06. Entire Agreement. This Agreement and the Ancillary Agreements
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Seller and the Purchaser with
respect to the subject matter hereof and thereof.
SECTION 11.07. Assignment. This Agreement may not be assigned by operation
of law or otherwise without the express written consent of the parties hereto
(which consent may be granted or withheld in the sole discretion of the parties
hereto); provided, however, that the Purchaser may assign this Agreement to an
Affiliate of the Purchaser without the consent of the other parties hereto;
provided further, however, that no assignment shall limit or affect the
Purchaser's obligations to make any payments hereunder. Any attempted assignment
in violation of this Section 11.07 shall be void.
SECTION 11.08. No Third Party Beneficiaries. Except for the provisions of
Article IX relating to Indemnified Parties, this Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person, including, without limitation, any union or any employee
or former employee of the Company, any legal or equitable right, benefit or
remedy of any nature whatsoever, including, without limitation, any rights of
employment for any specified period, under or by reason of this Agreement.
SECTION 11.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the parties
hereto or (b) by a waiver in accordance with Section 10.03.
SECTION 11.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, applicable to
contracts executed in and to be performed entirely within that state. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any New York state or federal court sitting in The City
of New York. The parties hereto expressly consent to the jurisdiction of any
such court and the venue therein.
SECTION 11.11. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 11.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity without the necessity of demonstration the inadequacy
of monetary damages.
IN WITNESS WHEREOF, the Company, the Stockholders and the Purchaser have
caused this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
DELCO INTERNATIONAL LTD. (INC.)
By: /s/ ROBERT DELMAN
Name: Robert Delman
Title: President
PERRY DELMAN
/s/ PERRY DELMAN
ROBERT DELMAN
/s/ ROBERT DELMAN
PETER KRANES
/s/ PETER KRANES
MICHAEL SEHLMEYER
/s/ MICHAEL SEHLMEYER
DENNIS KANFER
/s/ DENNIS KANFER
ONEIDA LTD.
By: /s/ PETER J. KALLET
Name: Peter J. Kallet
Title: President & CEO
<PAGE>
EXHIBIT 5.07
NON-COMPETE PURCHASE PRICE SCHEDULE
Perry Delman -- $4,000,000 payable over three years in quarterly installments of
$333,333.33 commencing on the Closing Date.
Rob Delman -- $1,800,000 payable over three years in quarterly installments of
$150,000 commencing on the Closing Date.
Peter Kranes -- $1,800,000 payable over three years in quarterly installments of
$150,000 commencing on the Closing Date.
Michael Sehlmeyer -- $750,000 payable over three years in
quarterly installments of $62,500 commencing on the Closing Date.
Dennis Kanfer -- $300,000 payable on the Closing Date.
<PAGE>
EXHIBIT 11.03
FINAL FORM OF PRESS RELEASE
ONEIDA LTD. TO ACQUIRE DELCO INTERNATIONAL;
STRATEGIC ACQUISITION EXPANDS FOODSERVICE DIVISION
Oneida, NY - May xx, 2000 - Oneida Ltd. (NYSE:OCQ) today announced that it has
signed a definitive agreement to acquire the stock of Delco International Ltd.
(Inc.), including its wholly owned subsidiary, Delco Tableware International
Inc., and its ABCO International division. Delco International is an established
marketer of tableware products for the foodservice industry. A privately held
company that has been in business for over 60 years, Delco International is
headquartered in Long Island, N. Y., where its offices will remain. Delco
International complements Oneida's current tableware businesses, and underscores
Oneida's strategy of achieving global leadership as a complete tabletop company.
Under terms of the agreement, Oneida will acquire Delco International for
approximately $76 million in cash. The transaction is expected to close during
Oneida's second quarter, which concludes July 29, 2000, and is subject to the
satisfactory completion of a due diligence review and other customary closing
conditions.
Delco International's annual sales are approximately $77 million. The company,
its subsidiary, Delco Tableware International, and its ABCO Division market
tableware products to a broad range of customers in the foodservice industry,
including distributors, restaurant chains, hotel chains and institutional
customers. In total, the company offers a full range of tabletop products.
Oneida President and Chief Executive Officer Peter J. Kallet stated, "We are
delighted to be associated with one of the most respected and successful
companies in the foodservice industry. We especially look forward to working
with their talented management team. Delco International also increases our
ability to satisfy the complete needs of our customers, while bringing
additional global product sources."
Delco International President Robert Delman and ABCO Managing Director Peter
Kranes added, "We are excited to join forces with Oneida Ltd., and to expand and
strengthen our own tableware lines through their vast product resources. Oneida
is also well recognized as one of the most innovative companies in the
foodservice industry with a great brand name and outstanding reputation."
Oneida's agreement to acquire Delco marks the latest in a series of steps to
position the Company as the world's most diversified tabletop resource. On May
23 Oneida announced an agreement to acquire Sakura, Inc., a leading consumer
dinnerware company. In addition, on May 30 Oneida announced an agreement to
acquire Viners of Sheffield Limited, an established United Kingdom marketer of
flatware and cookware, and also announced it had acquired exclusive
distribution rights for Schott Zwiesel crystal in the U.K.
Oneida Ltd. is a leading manufacturer of stainless steel and silverplated
flatware for both the consumer and foodservice industries, and a leading
supplier of dinnerware to the foodservice industry. Oneida also is a leading
supplier of a variety of crystal, glassware and metal serveware for the
tabletop market.
Statements contained in this press release that state that certain results are
"expected" or "anticipated" to occur, or otherwise state the company's
predictions for the future, are forward looking statements. These particular
forward-looking statements and all other statements that are not historical
facts, are subject to a number of risks and uncertainties, and actual results
may differ materially. Such factors include, but are not limited to: general
economic conditions in the Company's markets; difficulties or delays in the
development, production and marketing of new products; the impact of competitive
products and pricing; unforeseen increases in the cost of raw materials or
shortages of raw materials; significant increases in interest rates or the level
of the Company's indebtedness; major slow downs in the retail, travel or
entertainment industries; the loss of several of the Company's major customers;
underutilization of the Company's plants and factories; and the amount and rate
of growth of the Company's selling, general and administrative expenses.
